FORM 10-K

                       SECURlTlES AND EXCHANGE COMMlSSlON
                             WASHINGTON, D. C. 20549

            [X] Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

         For the fiscal year ended
           December 31, 1999                   Commission File Number  1-3132-2


                       INDIANAPOLIS POWER & LIGHT COMPANY
             (Exact name of Registrant as specified in its charter)

                  Indiana                                       35-0413620
         (State or other jurisdiction                      (I.R.S. Employer
           of incorporation or organization)                Identification No.)

                  One Monument Circle
                  Indianapolis, Indiana                                 46204
         (Address of principal executive offices)                     (Zip Code)

         Registrant's telephone number, including area code:  317-261-8261

         Securities Registered Pursuant to Section 12(b) of the Act:  None

         Securities Registered Pursuant to Section 12(g) of the Act:

         591,353 Shares of Cumulative Preferred Stock

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such  reports),  and (2) has been subject to the
filing requirements for at least the past 90 days. Yes  X   No
                                                      ----    ----

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )

     As of January 31, 2000,  there were 17,206,630  shares of the  registrant's
common    stock     (without    par    value)     issued    and     outstanding.
                     -------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Indianapolis Power & Light Company  definitive  Information
Statement for the Annual  Meeting of  Shareholders  to be held on April 19, 2000
are incorporated by reference into Part III of this Report.
<PAGE>

                                     PART I
                                     ------

Item 1. BUSINESS
        --------

ORGANIZATION

       Indianapolis  Power & Light Company (IPL) is an operating  public utility
incorporated  under the laws of the state of Indiana on October 27, 1926. IPL is
a wholly-owned  subsidiary of IPALCO  Enterprises,  Inc.  (IPALCO).  IPALCO is a
holding company incorporated under the laws of the state of Indiana on September
14, 1983. All common stock of IPL is owned by IPALCO.

       IPL has two business segments, electric and "all other." Steam operations
of IPL are in the "all  other"  segment  (see Note 14 in the Notes to  Financial
Statements for additional information about segments).

GENERAL

       IPL is engaged  primarily in generating,  transmitting,  distributing and
selling  electric  energy in the city of Indianapolis  and  neighboring  cities,
towns,  communities,  and adjacent rural areas, all within the state of Indiana,
the most distant point being about 40 miles from Indianapolis. It also produces,
distributes and sells steam within a limited area in such city.  There have been
no significant changes in the services rendered, or in the markets or methods of
distribution, since the beginning of the fiscal year. IPL intends to do business
of the same general  character  as that in which it is now engaged.  Indiana law
authorizes electricity suppliers to have exclusive retail service areas.

       IPL's business is not dependent on any single  customer or group of a few
customers. IPL's electricity sales for 1995-1999 are depicted on page I-4.

       The electric  utility  business is affected by seasonal  weather patterns
throughout  the year and,  therefore,  the  operating  revenues  and  associated
operating expenses are not generated evenly by month during the year.

       IPL's  generation,  transmission  and distribution  facilities  (electric
system) are described in Item 2, "PROPERTIES." IPL's electric system is directly
interconnected with the electric systems of Indiana Michigan Power Company,  PSI
Energy,  Inc.,  Southern Indiana Gas and Electric  Company,  Wabash Valley Power
Association,  Hoosier  Energy Rural Electric  Cooperative,  Inc. and the Indiana
Municipal Power Agency.

       Also, IPL is a member of the East Central Area Reliability  Group (ECAR),
and is cooperating under an agreement that provides for coordinated  planning of
generation and  transmission  facilities and the operation of such facilities to
promote  reliability  of bulk power supply in the  nine-state  region  served by
ECAR.  Smaller electric utility systems,  independent  power producers and power
marketers participate as associate members.

REGULATION

       IPL is subject to regulation by the Indiana Utility Regulatory Commission
(IURC)  as  to  its  services  and  facilities,   valuation  of  property,   the
construction,   purchase   or   lease   of   electric   generating   facilities,
classification of accounts, rates of depreciation,  rates and charges,  issuance
of securities  (other than  evidences of  indebtedness  payable less than twelve
months  after the date of issue),  the  acquisition  and sale of public  utility
properties or securities  and certain other matters (see Note 10 in the Notes to
Financial Statements).

       In addition,  IPL is subject to the  jurisdiction  of the Federal  Energy
Regulatory   Commission  (FERC),  with  respect  to  short-term  borrowings  not
regulated  by the  IURC,  the  sale  and  transmission  of  electric  energy  in
interstate commerce,  the classification of its accounts and the acquisition and
sale of utility  property  in certain  circumstances  as provided by the Federal
Power Act.

       IPL is also subject to federal,  state and local  environmental  laws and
regulations,  particularly as to generating station discharges affecting air and
water quality. The impact of compliance with such regulations on the capital and
operating costs of IPL has been and will continue to be substantial (see Item 7,
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS" under "Competition and Industry Changes").
 .
RETAIL RATEMAKING

       IPL's tariffs for electric and steam service to retail  customers  (basic
rates and charges) are set and approved by the IURC after public hearings.  Such
proceedings,  which have occurred at irregular intervals, involve IPL, the staff
of the IURC, the Office of the Indiana Utility  Consumer  Counselor,  as well as
other  interested  consumer  groups and customers.  In Indiana,  basic rates and
charges are determined after giving consideration,  on a pro-forma basis, to all
allowable  costs for  ratemaking  purposes  including  a fair return on the fair
value of the utility property used and useful in providing service to customers.
Once set, the basic rates and charges  authorized do not assure the  realization
of a fair return on the fair value of  property.  Pursuant to statute,  the IURC
conducts a periodic  review of the basic rates and charges of all  utilities  at
least once every four years. Other numerous factors  including,  but not limited
to,  weather,  inflation,  customer  growth  and  usage,  the  level  of  actual
maintenance and capital expenditures,  fuel costs,  generating unit availability
and  purchased  power  costs and  availability  can affect the return  realized.
During 1998, in an order  resulting from an IPL initiated  proceeding,  the IURC
declined to exercise its jurisdiction in part over IPL customers who voluntarily
select service under IPL's Elect Plan option.  Under two of these  options,  the
customer's  prices are not adjusted for changes in fuel costs or other  factors.
During 1999,  the total revenue from  customers  choosing the Elect Plan options
was $68  million.  The  Elect  Plan  will  expire  in  September  2001  unless a
subsequent plan is approved by the IURC.  Substantially  all other IPL customers
are served  pursuant to retail  tariffs that provide for the monthly  billing or
crediting to customers of increases or  decreases,  respectively,  in the actual
costs of fuel  consumed  from  estimated  fuel costs  embedded in base  tariffs,
subject to certain restrictions on the level of operating income.  Additionally,
most such  retail  tariffs  provide  for  billing of "lost  revenue  margins" on
estimated  kilowatt-hour  (kWh) sales reductions along with current and deferred
costs resulting from IPL's IURC-approved  demand side management programs (DSM).
IPL  maintains  its  books  and  records   consistent  with  generally  accepted
accounting  principles  reflecting  the impact of regulation  (see Note 1 in the
Notes to Consolidated Financial Statements and Item 7, "MANAGEMENT'S  DISCUSSION
AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS" under "Nature of
Operations and Regulatory Matters").

       Future events,  including the advent of retail  competition  within IPL's
service  territory,  could result in the  deregulation of part of IPL's existing
regulated  businesses  (see  "Competition  and  Industry  Changes"  in  Item  7,
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS"). Upon deregulation,  adjustments to IPL's accounting records may be
required to eliminate  the  historical  impact of  regulatory  accounting.  Such
adjustments,  as required by Statement of Financial Accounting Standards No. 101
(SFAS 101),  "Regulated  Enterprises  - Accounting  for the  Discontinuation  of
Application  of FASB  Statement  No. 71," would  eliminate  the  "effects of any
actions of regulators that have been  recognized as assets and  liabilities...."
Required  adjustments  could include expensing of any unamortized net regulatory
assets,  elimination of certain tax liabilities and a write down of any impaired
utility plant balances.  IPL does not expect to be required to adopt SFAS 101 in
the near term.

FUEL

       In  1999,  approximately  99% of  the  total  kWh  produced  by IPL  were
generated from coal. Natural gas, No. 2 fuel oil and purchased steam combined to
provide  the  remaining  kWh  generation.  Natural  gas is used in  IPL's  newer
combustion turbines.  In addition to use in oil-fired generating units, fuel oil
is used for start up and flame stabilization in coal-fired generating units.

       IPL's long-term coal contracts  provide for the major portion of its burn
requirements  through the year 2005. The long-term coal agreements are with four
suppliers  and the  coal is  mined  entirely  in the  state  of  Indiana.  It is
presently  believed  that all coal  used by IPL  will be  mined by  others.  IPL
normally  carries  fuel oil and a 60-day  supply  of coal to  offset  unforeseen
occurrences  such as labor  disputes,  equipment  breakdowns  and power sales to
other  utilities.  IPL increases its stockpile to an  approximate  80-day supply
when strikes are  anticipated in the coal industry.  In preparation for possible
supply problems with Year 2000 issues,  IPL temporarily  increased its stockpile
to an approximate 100-day supply at the end of 1999.

EMPLOYEE RELATIONS

       As of  December  31,  1999,  IPL had  1,936  employees  of whom  971 were
represented  by the  International  Brotherhood of Electrical  Workers,  AFL-CIO
(IBEW) and 307 were represented by the Electric Utility Workers Union (EUWU), an
independent  labor  organization.  In September 1999, the membership of the IBEW
ratified a new labor  agreement  that remains in effect until December 16, 2002.
The agreement provided for general pay adjustments of 4% in December 1999 and 2%
in both 2000 and 2001,  and  changes in pension  and health  care  coverage.  In
February of 1998, the membership of the EUWU ratified a new labor agreement that
remains in effect until February of 2001. The agreement provided for general pay
adjustments of 3% in both 1998 and 1999, as well as an adjustment of 2% in 2000.
The agreement also provides for increases in pension amounts.
<PAGE>
<TABLE>
<CAPTION>

                                         INDIANAPOLIS POWER & LIGHT COMPANY
                                         STATISTICAL INFORMATION - ELECTRIC

The following table of statistical information presents additional data on IPL's
operation.

                                                                Year Ended December 31,
                                  ------------------------------------------------------------------------------------
Operating Revenues (In              1999 (1)         1998 (1)          1997 (1)            1996              1995
Thousands):
                                  ------------     ------------    --------------     -------------     --------------
<S>                               <C>              <C>             <C>                <C>               <C>
  Residential                     $   282,254      $   269,351     $     261,832      $    261,819      $     243,055
  Small industrial and commercial     127,027          122,082           125,131           131,465            130,009
  Large industrial and commercial     328,903          321,103           306,761           298,720            275,803
  Public lighting                      10,386            9,754             9,324             9,043              8,369
  Miscellaneous                        10,600           12,469            12,050             9,264              8,289
                                  ------------     ------------    --------------     -------------     --------------
    Revenues - ultimate               759,170          734,759           715,098           710,311            665,525
consumers
  Sales for resale - REMC               1,035              936             1,082             1,141              1,105
  Sales for resale - other             40,132           50,140            21,954            13,312              6,758
                                  ------------     ------------    --------------     -------------     --------------
      Total electric revenues     $   800,337      $   785,835     $     738,134      $    724,764      $     673,388
                                  ============     ============    ==============     =============     ==============

Kilowatt-hour Sales (In
Millions):
  Residential                           4,510            4,359             4,276             4,367              4,277
  Small industrial and commercial       1,928            1,888             1,969             2,117              2,197
  Large industrial and commercial       7,187            7,138             6,857             6,772              6,509
  Public lighting                          73               71                69                71                 73
                                  ------------     ------------    --------------     -------------     --------------
    Sales - ultimate consumers         13,698           13,456            13,171            13,327             13,056
  Sales for resale - REMC                  33               31                29                29                 28
  Sales for resale - other              1,968            2,252             1,111               725                394
                                  ------------     ------------    --------------     -------------     --------------
      Total kilowatt-hours sold        15,699           15,739            14,311            14,081             13,478
                                  ============     ============    ==============     =============     ==============

Customers at End of Year:
  Residential                         385,799          379,943           374,686           370,029            365,163
  Small industrial and commercial      42,610           42,230            41,137            40,393             39,772
  Large industrial and commercial       4,107            4,036             3,960             3,657              3,557
  Public lighting                         509              445               357               313                290
                                  ------------     ------------    --------------     -------------     --------------
    Total ultimate consumers          433,025          426,654           420,140           414,392            408,782
  Sales for resale - REMC                   1                1                 1                 1                  1
                                  ------------     ------------    --------------     -------------     --------------
      Total electric customers        433,026          426,655           420,141           414,393            408,783
                                  ============     ============    ==============     =============     ==============


(1) Includes estimated  electric  operating revenue and kilowatt-hour  sales for
services  delivered  but not billed  during the period (see Notes 1 and 3 in the
Notes to Financial Statements).
</TABLE>


Item 2.       PROPERTIES
              ----------

       IPL's executive offices are in the IPALCO Corporate Center located at One
Monument  Circle,  Indianapolis,  Indiana.  This  facility  also houses  certain
administrative operations of certain other IPALCO subsidiaries.

       IPL also owns two  distribution  service  centers in Indianapolis at 1230
West Morris  Street and 3600 North  Arlington  Avenue.  IPL's  customer  service
center is located at 2102 North Illinois Street in Indianapolis.

       IPL owns and operates three primarily  coal-fired  generating plants that
are used for  electric  generation.  IPL also  operates  one coal and  gas-fired
plant.  For electric  generation,  the total gross nameplate rating is 3,024 MW,
winter  capability  is 3,036 MW and  summer  capability  is 2,956 MW.  For steam
generation, gross capacity is 1,990 Mlbs. (thousands of pounds) per hour.

       Total Electric Stations:

     H.  T.  Pritchard  plant   (Pritchard),   located  25  miles  southwest  of
Indianapolis  (seven units in service - one each in 1949,  1950,  1951, 1956 and
1967 and two in 1953)  with 367 MW  nameplate  rating  and net winter and summer
capabilities of 344 MW and 341 MW, respectively.

     E. W. Stout plant (Stout)  located in the  southwest  part of Marion County
(eleven units in service - one each in 1941,  1947,  1958,  1961, 1967, 1994 and
1995 and four in 1973)  with 921 MW  nameplate  rating and net winter and summer
capabilities of 1,000 MW and 924 MW, respectively.

     Petersburg plant (Petersburg), located in Pike County, Indiana (seven units
in  service - four in 1967 and one each in 1969,  1977 and 1986)  with  1,716 MW
nameplate rating and net winter and summer capabilities of 1,672 MW.

       Combination Electric and Steam Station:

     C.C.Perry  Section K plant (Perry K),  located in  Indianapolis  with 20 MW
nameplate rating (net winter  capability 20 MW, summer 19 MW) for electric and a
gross winter and summer capacity of 1,990 Mlbs. per hour for steam.


       Net  electrical  generation  during 1999,  at the  Petersburg,  Stout and
Pritchard stations accounted for about 69.0%, 23.3% and 7.7%,  respectively,  of
IPL's total net  generation.  Perry K produced all of the steam generated by IPL
for the steam  system.  In addition,  IPL  purchases  steam from an  independent
resource recovery system in Indianapolis.

        Included in the above  totals are three gas  turbine  units at the Stout
station  added in 1973,  one gas turbine added in 1994 and one gas turbine added
in 1995 with a combined  nameplate rating of 214 MW. Also included is one diesel
unit each at Pritchard  and Stout  stations and three diesel units at Petersburg
station, all added in 1967. Each diesel unit has a nameplate rating of 3 MW.

       During 1998, IPL announced  plans to construct up to 200 megawatts of new
combustion  turbines  (CTs).  The new  turbines  would be used  during  times of
highest or "peak"  electric  demand.  One  turbine is  expected  to be placed in
service by June 2000, and is included in the construction  forecast. IPL filed a
petition with the IURC  recommending that the IURC decline its jurisdiction over
IPL's planned construction and operation of the new CTs and adopt an alternative
procedure for dealing with the sale of power produced by the CTs to IPL's retail
customers.  During 1999, the IURC agreed to decline to exercise its jurisdiction
over the  construction  of the CTs.  The  Commission  also  agreed  to defer any
determinations regarding all ratemaking issues until a later proceeding.

       IPL's  transmission  system  includes  457 circuit  miles of 345,000 volt
lines,  359  circuit  miles of 138,000  volt lines and 269 miles of 34,500  volt
lines.  Underground  distribution  and service  facilities  include 686 miles of
conduit  and  6,487  wire  miles  of  conductor.   Underground  street  lighting
facilities  include 108 miles of conduit and 760 wire miles of  conductor.  Also
included  in the  system  are 73  bulk  power  substations  and 69  distribution
substations.

       Steam distribution properties include 22 miles of mains with 238 customer
connections.  Other properties  include coal and other minerals,  underlying 798
acres in Sullivan County, Indiana, and coal underlying about 6,215 acres in Pike
and Gibson  Counties,  Indiana.  IPL owns  approximately  4,067  acres in Morgan
County, Indiana and approximately 884 acres in Switzerland County,  Indiana, for
future plant sites.

       All  critical  facilities  owned  by IPL  are  well  maintained,  in good
condition and meet the present needs of IPL.

       The Mortgage  and Deed of Trust of IPL,  together  with the  Supplemental
Indentures thereto (the "Mortgage"),  secure first mortgage bonds issued by IPL.
Pursuant to the terms of the Mortgage,  substantially  all property owned by IPL
is subject to a direct first mortgage lien.

Item 3.       LEGAL PROCEEDINGS
              -----------------

     IPL is a  party  to  State  of  Michigan  et al v.  U.S.  EPA a  proceeding
                          ----------------------------------------
instituted in November,  1998, now pending in the U.S. Court of Appeals for
the  District of Columbia  Circuit.  This is a petition for review of EPA's rule
promulgated  October 27, 1998,  requiring Indiana and 22 other  jurisdictions to
impose more stringent  limitations on emissions of nitrogen oxides (the "NOx SIP
Call").  Petitioners challenging the NOx SIP Call include seven states, about 60
investor-owned electric utility companies, numerous trade associations, serveral
municipal utilities,  co-ops, and labor unions.  Intervenor-respondents  include
several  environmental  interest groups,  Canada, eight states in the Northeast,
and several eastern electric utility companies.

     EPA's NOx SIP Call would require  operators of coal-fired  electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired  electric utility boilers,
and a reduction of about 57% from IPL's current emissions.

     It is not possible to predict  whether  EPA's NOx SIP Call will  ultimately
survive judicial review.  Nor is it possible to predict  accurately the costs of
compliance.  IPL's  preliminary estimates are that the NOx SIP Call would
necessitate capital expenditures of about $180 million.

Item 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              ---------------------------------------------------

         None

EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 29, 2000

       Name, age (at December 31, 1999),  and positions and offices held for the
past five years:

                                                   From              To
                                                   ----              --
John R. Hodowal (54)
  Chairman of the Board                       February, 1990
  Chief Executive Officer                     May, 1989

Ramon L. Humke (67)
  President and Chief Operating
    Officer                                   February, 1990

John R. Brehm (46)
  Senior Vice President - Finance             May, 1998
  Senior Vice President - Finance
    and Information Services                  May, 1991           May, 1998

Ralph E. Canter (43)
  Senior Vice President -
    Customer Services                         May, 1998
  Vice President-
    Steam Operations                          May, 1995           May, 1998
  Manager of Steam Operations                 October, 1990       May, 1995

Bryan G. Tabler (56)
  Senior Vice President -
    Secretary and General Counsel             January, 1995

Stephen M. Powell (49)
  Senior Vice President -
    Energy Supply                             May, 1998
  Manager of Engineering and
    Production Services                       June, 1994          May, 1998

Paul S. Mannweiler (50)
  Senior Vice President -
    External Affairs                          January, 1997
  Partner, Locke Reynolds Boyd and Weisell    July, 1980          December, 1996

Max Califar (46)
  Vice President - Human
    Resources                                 December, 1992

Michael G. Banta (49)
  Vice President - Financial Strategy         May, 1998
  Vice President and Assistant General
      Counsel of IPL                          July, 1995          May, 1998

Daniel L. Short (42)
  Treasurer                                   January, 2000
  Treasurer - Mid-America
        Capital Resources                     January, 1995

Stephen J. Plunkett (51)
  Controller                                  May, 1991

                                     PART II
                                     -------

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
--------------------------------------------------------------------------------

       All common stock of IPL is owned by IPALCO and is not publicly  traded on
any stock exchange.

       Aggregate  dividends  paid on the common  stock were  $129.9  million and
$214.2  million  during  1999 and  1998,  respectively.  Dividends  were paid at
varying intervals as determined by the Board of Directors.

     IPL's  Board of  Directors  declared  a dividend  on common  stock of $12.9
million on November 30, 1999, payable January 15, 2000.

Dividend Restrictions
---------------------

       So long as any of the  several  series of bonds of IPL  issued  under the
Mortgage  and  Deed of  Trust,  dated as of May 1,  1940,  as  supplemented  and
modified,  executed  by IPL to  American  National  Bank and  Trust  Company  of
Chicago, as Trustee,  remain  outstanding,  IPL is restricted in the declaration
and payment of dividends,  or other  distribution on shares of its capital stock
of any class, or in the purchase or redemption of such shares,  to the aggregate
of its net income, as defined in Section 47 of such Mortgage, after December 31,
1939.  The amount which these  Mortgage  provisions  would have permitted IPL to
declare and pay as dividends at December 31, 1999, exceeded retained earnings at
that  date.  Such  restrictions  do not apply to the  declaration  or payment of
dividends  upon any  shares  of  capital  stock of any class to an amount in the
aggregate not in excess of $1,107,155,  or to the application to the purchase or
redemption  of any shares of capital stock of any class of amounts not to exceed
in the aggregate the net proceeds received by IPL from the sale of any shares of
its capital  stock of any class  subsequent  to December 31, 1939.  In addition,
pursuant to IPL's Articles of Incorporation, no dividends may be paid or accrued
and no other  distribution may be made on IPL's common stock unless dividends on
all outstanding shares of IPL preferred stock have been paid or declared and set
apart for payment.  The management of IPL believes these  restrictions  will not
materially restrict anticipated dividends.
<PAGE>
<TABLE>
<CAPTION>

Item 6.        SELECTED FINANCIAL DATA
               -----------------------



(In Thousands)                                      1999              1998              1997             1996              1995
----------------------------------------      ---------------   ---------------   ---------------  ---------------   ---------------

<S>                                           <C>               <C>               <C>              <C>               <C>
Total operating revenues (1)                  $      834,652    $      821,256    $      776,427   $      762,503    $      709,206
Operating income                                     183,501           179,511           167,315          163,219           147,588
Allowance for funds used
  during construction                                  2,201             2,300             4,407            9,321            11,370
Income before cumulative effect
  of accounting change (1)                           146,231           149,147           133,402          122,588           106,273
Cumulative effect of accounting change (1)                 -                 -            18,347                -                 -
Net income                                           146,231           149,147           151,749          122,588           106,273
Preferred dividend requirements                        3,213             3,119             2,760            3,182             3,182
Income applicable to
  common stock                                       143,018           146,028           148,989          119,406           103,091
Utility plant - net                                1,750,412         1,748,460         1,766,383        1,787,969         1,792,007
Total assets                                       2,048,750         2,023,066         2,049,772        2,052,400         2,108,816
Construction expenditures                            103,452            79,458            73,130           78,543           166,874
Common shareholder's equity                          780,510           767,926           835,492          782,249           747,129
Nonredeemable cumulative
  preferred stock                                     59,135            59,135             9,135           51,898            51,898
Long-term debt (less current
  maturities and sinking
  fund requirements)                                 627,951           627,893           627,840          627,791           669,000


    See financial statements.

(1) In  1997,  IPL  adopted  the  unbilled  revenue  method  of  accounting  for
    electricity and steam delivered during the period.  Revenues are accrued for
    services  provided  but unbilled at the end of each month (see Notes 1 and 3
    in the Notes to Financial Statements).
</TABLE>
<PAGE>

Item 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              ---------------------------------------------------------------
              RESULTS OF OPERATIONS (INCLUDING ITEM 7A)
              -----------------------------------------

       IPL  has  two  business  segments  (electric  and  "all  other").   Steam
operations  are in the  "all  other"  category  (see  Note  14 in the  Notes  to
Financial Statements).

FORWARD-LOOKING STATEMENTS

       IPL hereby files cautionary statements identifying important factors that
could cause IPL's actual results to differ  materially  from those  projected in
forward-looking statements of IPL. This Form 10-K, and particularly Management's
Discussion and Analysis,  contains forward-looking  statements.  Forward-looking
statements  express an expectation  or belief and contain a projection,  plan or
assumption with regard to, among other things, future revenues, income, earnings
per share or capital structure.  Such statements of future events or performance
are not guarantees of future performance and involve estimates,  assumptions and
uncertainties.   The  words  "anticipate,"   "believe,"   "estimate,"  "expect,"
"forecast,"  "project,"  "objective,"  and similar  expressions  are intended to
identify forward-looking statements.

       Some important  factors that could cause IPL's actual results or outcomes
to differ  materially  from those  discussed in the  forward-looking  statements
include,  but are not limited to,  fluctuations  in customer  growth and demand,
weather,  fuel costs,  generating unit  availability,  purchased power costs and
availability,  regulatory  action,  environmental  matters,  federal  and  state
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions.  In addition,  IPL's ability to have available an
appropriate  amount of production  capacity in a timely manner can significantly
affect IPL's financial performance.  The timing of deregulation and competition,
product development and technology changes are also important potential factors

       All such factors are difficult to predict, contain uncertainties that may
materially affect actual results and are beyond the control of IPL.

LIQUIDITY AND CAPITAL RESOURCES

                   Nature of Operations and Regulatory Matters
                   -------------------------------------------
Regulation
----------

       IPL is a regulated public utility and is principally engaged in providing
electric and steam service to the Indianapolis metropolitan area. As a regulated
entity,  IPL is  required  to  use  certain  accounting  methods  prescribed  by
regulatory bodies which may differ from those accounting  methods required to be
used by nonregulated entities (see Note 1 in the Notes to Financial Statements).

       IPL is subject to  extensive  regulation  at both the  federal  and state
level.  IPL is  substantially  affected by the  regulatory  jurisdiction  of the
Environmental  Protection Agency and the Federal Energy Regulatory Commission at
the federal level and the Indiana Department of Environmental Management and the
Indiana  Utility  Regulatory   Commission  (IURC)  at  the  state  level.  Other
significant regulatory agencies affecting IPL include but are not limited to the
U.S.  Department  of  Labor  and the  Indiana  Occupational  Safety  and  Health
Administration.  The regulatory power of the IURC over IPL is both comprehensive
and typical of the economic regulation generally imposed by state public utility
commissions over investor-owned utilities.

       An inherent  business risk facing any regulated public utility is that of
unexpected or adverse  regulatory  action.  Regulatory  discretion is reasonably
broad in Indiana,  as elsewhere.  Therefore,  IPL attempts to work cooperatively
with  regulators  and those who  participate in the  regulatory  process,  while
remaining  vigilant  and  steadfast  in  protecting  IPL's  legal  rights in the
regulatory  process.  IPL takes an active role in addressing  regulatory  policy
issues in the current regulatory environment which is subject to rapid change in
large  part  because of the trend  toward  restructuring  of the  United  States
electric utility industry and increased activity by environmental regulators.

Elect Plan
----------

       In 1998, the IURC approved a plan that allows IPL to offer customers with
less than 2,000  kilowatts  of demand an  opportunity  to choose  from  optional
payment or service plans.  IPL's authority to offer these options will expire on
September 18, 2001, and any contracts  entered into thereunder must terminate on
or before that date unless a subsequent plan is approved by the IURC.

       Under the plan,  eligible IPL customers may enter into written  contracts
for:

      Fixed Rate - Pay a guaranteed  fixed rate per unit of consumption  for one
      or more years.

      Green Power - Purchase  environmentally friendly or "green"
      power.

       Additionally,  residential  customers  may choose a "Sure  Bill"  option,
paying  the  same  bill  each  month  for 12  months,  regardless  of  how  much
electricity  is used.  Customers not choosing one of these  options  continue to
receive electric service under existing  tariffs.  (See Item 1, BUSINESS,  under
the subheading "Retail Ratemaking.")

Authorized Annual Operating Income
----------------------------------

       During  quarterly  fuel  adjustment   clause   proceedings,   the  annual
jurisdictional operating income of IPL's electric business is subject to review.
IPL's steam business is subject to annual fuel  adjustment  clause  proceedings.
Customer refunds could result if actual annual  jurisdictional  operating income
exceeds  levels  authorized  by the IURC (see  Note 1 in the Notes to  Financial
Statements).  IPL does not anticipate  any customer  refunds to result from such
reviews during 2000.


                        Competition and Industry Changes
                        --------------------------------

       In  recent  years,  various  forms  of  proposed   industry-restructuring
legislation  and/or rulemakings have been introduced at the federal level and in
several states.  Generally,  the intent of these  initiatives is to encourage an
increase in competition  within the regulated  electric utility industry.  While
federal  rulemaking to date has addressed  only the electric  wholesale  market,
various state  legislatures  are  considering or have enacted new laws impacting
the retail energy markets within their  respective  states.  A discussion of the
legislative and regulatory initiatives most likely to affect IPL follows:

Wholesale Energy Market
-----------------------

       In April 1996, the Federal  Energy  Regulatory  Commission  (FERC) issued
Orders 888 and 889  concerning  open access  transmission  service for wholesale
sales.  These Orders require all utilities under FERC  jurisdiction  to: 1. file
open,  nondiscriminatory   transmission  access  tariffs  with  FERC;  2.  offer
transmission   to  eligible   customers   comparable  to  service  they  provide
themselves;  and 3. take service under the tariffs for their own wholesale sales
and purchases of electricity.  IPL filed its open access  transmission tariff on
January 6, 2000.  Historically,  FERC has issued an order  making  such  tariffs
effective  as of their date of  filing.  FERC  Order 888 also  provides  for the
recovery of utility  stranded costs which are defined as the difference  between
revenues  received by utilities under  traditional  ratemaking and  market-based
prices.

       In  December  1999,  FERC  issued  Order  2000,  which  provides  for the
voluntary  formation of regional  transmission  organizations  (RTOs),  entities
created to operate,  plan and control utility  transmission  assets.  Order 2000
also  prescribes  certain   characteristics  and  functions  of  acceptable  RTO
proposals.  The rule requires all public  utilities that own, operate or control
interstate  transmission to individually file in October 2000, either a proposal
to join an RTO or the reasons for not participating in an RTO.

Retail Energy Market
--------------------

       The  legislatures  of several states have enacted,  and many other states
are  considering,  new laws that would allow  various forms of  competition  for
retail sales of electric  energy.  While each state proposal is different,  most
provide for some recovery of a utility's  stranded costs and require an extended
transition  period before  competition is fully effective.  Additionally,  a few
states have  implemented  pilot programs that experiment with allowing some form
of customer choice of electricity suppliers.

       In Indiana,  competition  among electric  energy  providers for sales has
focused  primarily  on the  sale of bulk  power to other  public  and  municipal
utilities.  Indiana law provides  for  electricity  suppliers to have  exclusive
retail service areas.

       In  1995,  the  Indiana   General   Assembly,   anticipating   increasing
competitive  forces in the  regulated  public  utility  industry,  enacted  I.C.
8-1-2.5.  This law enables the IURC to consider  and approve,  on an  individual
utility basis, utility-initiated proposals wherein the IURC declines to exercise
jurisdiction  over the whole or any part of the  utility,  or its retail  energy
service or both. The IPL Elect Plan was approved by the IURC under this law.

       During 1997, the Indiana General Assembly  authorized a legislative study
committee to assess the issue of electric utility competition and restructuring.
A comprehensive restructuring bill was introduced in the Indiana Senate in 1998,
but  failed  to  pass.  Subsequently,  comprehensive  restructuring  bills  were
submitted in both 1999 and 2000 and also failed to pass.  IPL  continues to work
cooperatively   with  other  electric  utilities  in  Indiana  regarding  future
legislation.  However, the outcome of such efforts is uncertain.

National Ambient Air Quality Standards
--------------------------------------

       On July 16, 1997, the United States Environmental Protection Agency (EPA)
promulgated  final rules tightening the National  Ambient Air Quality  Standards
for ozone and creating new fine  particulate  matter  standards.  On October 29,
1999,  after conducting a rehearing of its initial decision of May 14, 1999, the
United States Court of Appeals for the District of Columbia  Circuit  determined
that  the new  ozone  standards  were not  issued  lawfully,  but left  open the
question of future remedy. The Court also determined that the standards for fine
particulate  matter  were  legally  deficient  in  certain  respects.   EPA  has
petitioned the Supreme Court to review the Court of Appeals' decision.

NOx SIP Call
------------

       On October 27, 1998,  EPA issued a final rule calling for Indiana,  along
with 22 other jurisdictions in the eastern third of the United States, to impose
more  stringent  limits on nitrogen  oxides (NOx) from  fossil-fuel  fired steam
electric generators, such as those operated by IPL. This rule (the NOx SIP Call)
was based in part on the new ozone  standards  that were later held  unlawful in
the Court of Appeals'  decision  discussed above. In a separate  decision on May
25, 1999, the Court of Appeals  stayed the  compliance  deadlines in the NOx SIP
Call.

       Because  power  plants  emit  nitrogen  oxides,  as well as  certain  air
pollutants that may contribute to formation of fine particulate matter, existing
IPL sources may be required to be  retrofitted  with  additional  air  pollution
controls in the future, either as a result of EPA's 1997 and 1998 regulations or
due to future regulatory actions. IPL is a party to litigation  concerning EPA's
1997 and 1998 final regulations, and that litigation is still in progress.

       EPA's NOx SIP Call would require operators of coal-fired electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired  electric utility boilers,
and a reduction of about 57% from IPL's current emissions.

       It is not possible to predict  whether EPA's NOx SIP Call will ultimately
survive judicial review.  Nor is it possible at this time to predict  accurately
the costs of compliance.  IPL's preliminary  estimates are that the NOx SIP Call
would necessitate capital expenditures of about $180 million.

       The  Indiana   Department  of   Environmental   Management  has  recently
circulated a draft rule  calling for  coal-fired  electric  utilities to meet an
emission  limit  of 0.25  pounds  of NOx per  million  BTUs of heat  input  on a
company-wide basis.  Preliminary estimates are that compliance with such a limit
would call for IPL to expend  capital of  approximately  $81 million.  It is not
possible to predict whether the draft rule will ever become effective.

       As to  timing,  if  either  of the  requirements  discussed  in  the  two
preceding  paragraphs  became  effective,  they  would  likely do so during  the
2000-2001 period and would probably necessitate deployment of capital during the
period between 2002 and 2005. There can be no certainty about these estimates.

       IPL expects to refine the above estimates as engineering studies progress
and when, as, and if such rules become effective.

           Liquidity, Financing Requirements and Capital Market Access
           -----------------------------------------------------------

       Liquidity  is the  ability  of an  entity  to  meet  its  short-term  and
long-term cash needs.  IPL's  liquidity is a function of its ability to generate
internal  funds,  its  construction  program,  its mortgage  covenants  and loan
agreements and its access to external capital markets.

       Sustaining investment grade debt ratings is also a key element for having
adequate  liquidity and financial  flexibility.  As of December 31, 1999,  IPL's
senior secured debt was rated AA- by Standard & Poor's,  Aa2 by Moody's Investor
Services and AA by Duff & Phelps,  and IPL's  commercial paper was rated A-1+ by
Standard & Poor's,  P-1 by Moody's  Investor  Services and D-1 by Duff & Phelps.
IPL  expects  to be able to  maintain  investment  grade debt  ratings  into the
foreseeable future.

       During 1999, IPL refinanced its $23.5 million 7.45% Series first mortgage
bonds with the use of proceeds from a $23.5  million  unsecured  note.  The 1999
Series note has an interest  rate based on  tax-exempt  auction  rates and has a
maturity  date  of  August  1,  2030  (see  Note 7 in  the  Notes  to  Financial
Statements).

       IPL has no  long-term  debt that  matures  during  2000.  However,  other
existing higher-rate debt may be refinanced depending upon market conditions.

       During the next five  years,  IPL  expects to meet its cash  requirements
without any  additional  permanent  financing.  Cash flows from  operations  and
temporary short-term  borrowings are projected to provide the funds required for
IPL's  construction  program.  See the following  section for  discussion of the
construction program.

                               Future Performance
                               ------------------

       Traditionally,   retail  KWH  sales,   after   adjustments   for  weather
variations,  have  grown  in  reasonable  correlation  with  growth  in  service
territory  economic  activity.  During the past 10 years, IPL's retail KWH sales
have grown at a compound  annual rate of 2.0%,  while the  Indianapolis  economy
grew at an annual rate of 2.5%. The Indianapolis  economy is expected to grow at
an annual rate of 2.7% for 2000 through 2004,  according to the Kelley School of
Business at Indiana University.

       IPL's  wholesale KWH sales  decreased 12% in 1999 over the level achieved
in 1998 largely as a result of planned and unplanned generating unit outages. As
IPL's  retail  sales  grow the  amount  of  generating  capacity  available  for
wholesale  sales is more  limited.  The  ability  to sell  power  in the  highly
competitive  wholesale market is also highly dependent on market  conditions and
the level and frequency of unplanned outages.  IPL is unable to predict with any
degree of certainty the level of wholesale sales that may be achieved in 2000.

       Operating and  maintenance  expenses were $425.0  million in 1999.  These
expenses in 2000 will be influenced by the level of KWH  generation,  generating
unit availability and overhaul costs,  cost control programs and inflation.  IPL
depends on purchased power, in part, to meet its retail  obligations.  Purchased
power costs are highly  volatile and,  therefore,  IPL is unable to predict with
any degree of certainty the level of those costs for 2000.

       IPL's  construction  program  for  the  three-year  period  2000-2002  is
estimated to cost $294.0  million  including  AFUDC.  The estimated  cost of the
program  by year (in  millions)  is $106.5 in 2000,  $103.9 in 2001 and $83.6 in
2002. It includes $152.2 million for additions,  improvements  and extensions to
transmission  and  distribution  lines,  substations,  power  factor and voltage
regulating equipment,  distribution transformers and street lighting facilities.
The  construction  program  also  includes  $6.6 million for  construction  of a
100-megawatt  combustion  turbine  expected to be in service by June 2000. These
projected  amounts  also  include  $20.7  million of costs  associated  with new
environmental  standards proposed by the EPA which are currently under appeal in
the United States Court of Appeals (see "Competition and Industry Changes").


                                      Other
                                      -----

Cumulative Effect of Accounting Change
--------------------------------------

       On December 31, 1997, effective January 1, 1997, IPL adopted the unbilled
revenue  method of  accounting  for all electric and steam sales to more closely
match revenues with expenses.  Under this method,  IPL accrues  revenues for all
electric and steam  energy  delivered  to  customers  during the period  whether
billed or not. Previously,  IPL recognized these revenues only as customers were
billed,  with the service rendered after monthly meter reading dates through the
end of a calendar month recognized as operating revenues in the following month.
The cumulative effect of this change in accounting method as of January 1, 1997,
net of income  taxes,  was a one-time  income  increase of $18.3 million and was
reported as a separate  component of net income for 1997. This accounting change
does not  affect  IPL's  cash  flow or  liquidity  (see  Note 3 in the  Notes to
Financial Statements).

Preferred Stock, Debt Issuance  and Dividend Restrictions
------------------------------  -------------------------

       Restrictions  on IPL's  ability to issue  certain  securities or pay cash
dividends  are  contained in its Mortgage and Deed of Trust  (Mortgage)  and its
Amended Articles of Incorporation (Articles). The Articles require that, so long
as any shares of  preferred  stock are  outstanding,  the net income of IPL,  as
specified therein,  be at least one and one-half times the total interest on the
funded debt and the pro forma dividend requirements on the outstanding,  and any
proposed,  preferred stock before any additional  preferred stock is issued. The
Mortgage requires that net earnings as calculated thereunder be two and one-half
times  the  annual  interest   requirements   before  additional  bonds  can  be
authenticated  on the basis of property  additions.  Based on IPL's net earnings
for the 12 months ended December 31, 1999, the ratios under the Articles and the
Mortgage are 5.05 and 12.35, respectively.

       So long as any of the  several  series of bonds of IPL  issued  under its
Mortgage  remain  outstanding,   and  subject  to  certain  exceptions,  IPL  is
restricted in the declaration and payment of dividends, or other distribution on
shares of its capital  stock of any class,  or in the purchase or  redemption of
such shares,  to the  aggregate  of its net income,  as defined in Section 47 of
such  Mortgage,  after  December  31,  1939.  The amount  which  these  Mortgage
provisions  would have permitted IPL to declare and pay as dividends at December
31, 1999,  exceeded  retained  earnings at that date.  In addition,  pursuant to
IPL's  Articles,  no dividends may be paid or accrued and no other  distribution
may be made on IPL's common stock unless dividends on all outstanding  shares of
IPL preferred stock have been paid or declared and set apart for payment

       IPL believes these  requirements will not restrict any anticipated future
financings or cash dividend payments.  At December 31, 1999, and considering all
existing restrictions,  IPL had the capacity to issue approximately $1.2 billion
of additional long-term debt.

Market Risk Sensitive Instruments and Positions
-----------------------------------------------

       The  primary  market  risk to which IPL is exposed is related to interest
rate  risk.  IPL uses  long-term  debt as a  primary  source of  capital  in its
business.  A portion of this debt has an  interest  component  that  resets on a
periodic basis to reflect current market  conditions.  IPL had $455.3 million of
fixed rate and $173.5  million of variable rate  long-term  debt  outstanding at
December 31, 1999. The weighted  average  interest rates of IPL's fixed rate and
variable rate long-term debt were 6.7% and 3.8%,  respectively,  at December 31,
1999.  The fair values of the fixed rate and variable rate  long-term  debt were
$441.6 million and $173.5 million at December 31, 1999.  IPL's $80 million 6.05%
Series first mortgage bond matures in February 2004.

       To manage IPL's exposure to  fluctuations  in interest rates and to lower
funding costs,  IPL has entered into an interest rate swap. Under this swap, IPL
agrees with counterparties to exchange,  at specified intervals,  the difference
between  fixed-rate and floating-rate  interest amounts  calculated on an agreed
notional amount.  This interest  differential  paid or received is recognized in
the  statements  of income as a component of interest  expense.  At December 31,
1999,  IPL's interest rate swap agreement had a notional  amount of $40 million,
and it expires in January  2023.  IPL agrees to pay  interest at a fixed rate of
5.21%  to a swap  counter  party  and  receive  a  variable  rate  based  on the
tax-exempt  weekly rate.  The fair value of this swap agreement was $0.4 million
at December 31, 1999.

Year 2000
---------

       IPL has not  discovered  any  significant  problems  associated  with its
systems as a result of the year  change from 1999 to 2000.  It is unlikely  that
any such  problems  will be  encountered  in the  future.  However,  should such
problems  occur,  IPL has  established a Year 2000 Committee  which would act to
correct any problems as a result of the year  changeover.  It is not likely that
any such occurrences  would have a material effect on the financial  position or
results of operations of the Company.

Cash Flows
----------

       Additional   information  regarding  IPL's  historical  cash  flows  from
operations,  investing  and  financing  for the past three years,  including the
capital expenditures of IPL, is disclosed in the Statements of Cash Flows and in
the Notes to Financial Statements.

<PAGE>
RESULTS OF OPERATIONS

       Income  applicable  to common  stock  decreased  by $3.0  million in 1999
compared to 1998. Income applicable to common stock decreased by $3.0 million in
1998  compared  to  1997.  The  following  discussion   highlights  the  factors
contributing to these decreases.

Utility Operating Revenues
--------------------------

     Operating  revenues in 1999 and 1998 increased from the prior year by $13.4
million and $44.8 million, respectively. The increases in revenues resulted from
the following:

                                                         Increase (Decrease)
                                                         -------------------
                                                  1999 over 1998  1998 over 1997
                                                  --------------  --------------
                                                          (In Millions)
Electric:
     Change in retail KWH sales - net of fuel         $ 17.5       $ 14.5
     Change in estimate for unbilled revenue             8.0           -
     Fuel revenue                                       (0.1)         3.5
     Wholesale revenue                                  (9.9)        28.0
     DSM tracker revenue                                 0.8          1.3
Steam revenue                                           (1.1)        (2.9)
Other revenue                                           (1.8)         0.4
                                                      ------       ------
     Total change in operating revenues               $ 13.4       $ 44.8
                                                      ======       ======

       The  increase in retail KWH sales in 1999  primarily  was due to economic
growth in Indianapolis.  The increase in 1998 also reflected  economic growth in
Indianapolis,  as well as an increase  in cooling  degree days during the summer
partially  offset by a decrease in heating  degree days.  Actual and  percentage
changes in electric  customers and in heating and cooling  degree days for these
periods are as follows:

                                                 Increase (Decrease)
                                                 -------------------
                                     1999 over 1998            1998 over 1997
                                     --------------            --------------

Electric Residential Customers       5,856      1.5%          5,257      1.4%
Commercial & Industrial Customers      451      1.0%          1,169      2.6%

Heating Degree Days                    448     10.1%         (1,261)   (22.2)%
Cooling Degree Days                   (73)     (5.8)%           381     43.8%

       A change in the estimate for unbilled  revenue was made during 1999.  The
changes  in fuel  revenues  in  1999  and  1998  from  the  prior  year  reflect
differences  in fuel  costs  billed to  customers.  Wholesale  sales  were $41.2
million, $51.1 million and $23.1 million for 1999, 1998 and 1997,  respectively.
The  decrease in  wholesale  revenues  in 1999 was a result of both  planned and
unplanned  generating  unit  outages  during  1999.  The  increase in  wholesale
revenues during 1998 reflected  increased wholesale marketing efforts and energy
requirements  of other  utilities.  The decrease in other  revenues  during 1999
reflects decreased service revenues.

Utility Operating Expenses
--------------------------

       Fuel  expense  decreased  in 1999  by $7.2  million  due  primarily  to a
decrease  in deferred  fuel cost and a 0.3%  decrease  in  generation  caused by
unscheduled unit outages.  During 1998, fuel expense  increased by $16.5 million
primarily as a result of increased total KWH sales.

       Other operating expenses decreased $18.3 million in 1999 primarily due to
decreased  administrative  and general  expenses of $10.5  million and increased
sales of emission  allowances of $4.8 million  (reduced  operating  expenses) as
well as other  cost  improvements.  The  decreased  administrative  and  general
expenses  were  primarily  due to  decreased  benefits  expense  as  well as the
non-recurrence of a $2.2 million charge in 1998 for a voluntary early retirement
and separation program. During 1998, other operating expenses increased from the
prior year by $12.3 million. The increase in 1998 was partially due to increased
administrative  and general  expenses of $7.7 million.  This increase was due to
the  voluntary  early  retirement  and  separation  program as well as increased
outside  services and  increased  labor costs.  Electric  distribution  expenses
increased  $1.7 million and  production  expenses  increased $1.5 million during
1998.

       Power purchased increased by $22.6 million during 1999 as a result of the
combination  of higher market prices for  scheduled  summer  peaking power and a
$13.0 million  increase in  replacement  power costs due to the  unusually  high
level of generating  unit outages  during peak  electricity  demand in the third
quarter of 1999.  Power  purchased  decreased  $0.7  million  during 1998 due to
decreased demand charges partially offset by increased purchases of KWH.

       Maintenance  expenses increased by $4.1 million during 1999 and decreased
by $3.2 million during 1998.  These  variances  primarily  reflect the timing of
major generating unit overhauls.

       Taxes other than  income  taxes  decreased  by $0.9  million  during 1999
primarily  due to decreased  employment  taxes.  During  1998,  taxes other than
income  taxes  increased  $2.0  million  from the prior  period due to increased
property taxes, gross income taxes and employment taxes.

     Income taxes - net  increased in both 1999 and 1998 from the prior years by
$4.3 million and $6.9 million, respectively.  These changes reflect increases in
pretax operating income.

Other Income And Deductions
---------------------------

       Allowance for equity funds used during construction did not change during
1999 from the prior period.  During 1998, allowance for equity funds used during
construction  decreased $2.1 million. In mid-1997,  the amortization of deferred
carrying charges on a plant asset ended, contributing to this decrease.

       Other-net,  which  includes  the pretax  non-operating  income  from IPL,
increased by $2.3 million  during 1999.  This  increase was  primarily due to an
insurance recovery. Other-net decreased by $4.7 million during 1998, as compared
to  the  prior  year.  The  decrease  in  1998  was  primarily  related  to  the
non-recurring gain from the sale of a retired plant site in 1997.

        During 1998, a gain from the liquidation and termination of an agreement
to purchase  power was  recognized by IPL in the amount of $12.5 million  before
taxes.

Interest Charges
----------------

       Interest on long-term  debt decreased by $0.3 million and $0.4 million in
1999 and 1998, respectively,  from the prior years. The decrease in 1999 was due
to decreased  interest  expense on floating debt due to lower  average  interest
rates.  The decrease in 1998 was due to the  redemption  of $11.3 million 5 5/8%
Series in May 1997.

       Other  interest  charges  increased by $0.5 million during 1999 primarily
due to increased short-term debt borrowings. Other interest charges decreased by
$0.6 million  during 1998 from the prior year as a result of decreased  interest
on tax assessments and decreased interest on short-term debt borrowings.

Cumulative Effect of Accounting Change
--------------------------------------

       A cumulative  effect of accounting change in the amount of $18.3 million,
net of taxes, was recorded during 1997.  Effective  January 1, 1997, IPL adopted
the unbilled  revenue method of accounting for  electricity  and steam delivered
during the period.  Revenues are accrued for  services  provided but unbilled at
the end of each month (see Notes 1 and 3 in the Notes to Financial Statements).

New Accounting Pronouncement
----------------------------

       The Financial  Accounting  Standards Board issued  Statement of Financial
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities,"  in June 1998. SFAS 137 delayed the effective date of this standard
to all fiscal  quarters of all fiscal years  beginning  after June 15, 2000 (see
Note 1 in the Notes to Financial Statements).

Item 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
              -------------------------------------------



                          INDEPENDENT AUDITORS' REPORT
                          ============================


To the Board of Directors of Indianapolis Power & Light Company:

We have audited the  accompanying  balance sheets of Indianapolis  Power & Light
Company as of December 31, 1999 and 1998, and the related  statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1999. These financial  statements are the  responsibility  of IPL's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial  position of  Indianapolis  Power & Light Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 1999 in conformity
with generally accepted accounting principles.

     As discussed  in Note 3 to the  financial  statements,  in 1997 the Company
changed its method of accounting for unbilled revenue.


DELOITTE & TOUCHE LLP

Indianapolis, Indiana
January 20, 2000
<PAGE>
<TABLE>
<CAPTION>


                                        INDIANAPOLIS POWER & LIGHT COMPANY

                                               Statements of Income
                               For the Years Ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------------------------------------------

                                                                            1999            1998            1997
--------------------------------------------------------------------------------------------------------------------
                                                                                       (In Thousands)
OPERATING REVENUES (Notes 3 and 10):
<S>                                                                     <C>             <C>             <C>
  Electric                                                              $   800,337     $   785,835     $   738,134
  Steam                                                                      34,315          35,421          38,293
                                                                        ------------    ------------    ------------
    Total operating revenues                                                834,652         821,256         776,427
                                                                        ------------    ------------    ------------

OPERATING EXPENSES:
  Operation:
    Fuel                                                                    173,872         181,036         164,578
    Other                                                                   137,348         155,610         143,311
  Power purchased                                                            29,769           7,170           7,833
  Purchased steam                                                             6,391           5,968           7,075
  Maintenance                                                                77,637          73,501          76,679
  Depreciation and amortization                                             107,469         103,223         103,230
  Taxes other than income taxes                                              34,190          35,047          33,071
  Income taxes - net (Note 9)                                                84,475          80,190          73,335
                                                                        ------------    ------------    ------------
    Total operating expenses                                                651,151         641,745         609,112
                                                                        ------------    ------------    ------------
OPERATING INCOME                                                            183,501         179,511         167,315
                                                                        ------------    ------------    ------------

OTHER INCOME AND (DEDUCTIONS):
  Allowance for equity funds used during construction                         1,372           1,389           3,462
  Other - net                                                                 2,130            (158)          4,507
  Gain on termination of agreement (Note 13)                                    -            12,500             -
  Income taxes - net (Note 9)                                                  (581)         (4,196)         (1,105)
                                                                        ------------    ------------    ------------
    Total other income - net                                                  2,921           9,535           6,864
                                                                        ------------    ------------    ------------
INCOME BEFORE INTEREST CHARGES                                              186,422         189,046         174,179
                                                                        ------------    ------------    ------------

INTEREST CHARGES:
  Interest on long-term debt                                                 38,057          38,395          38,809
  Other interest                                                              1,141             675           1,243
  Allowance for borrowed funds used during construction                        (829)           (911)           (945)
  Amortization of redemption premiums and expenses on
    debt - net                                                                1,822           1,740           1,670
                                                                        ------------    ------------    ------------
    Total interest charges                                                   40,191          39,899          40,777
                                                                        ------------    ------------    ------------

INCOME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                                     146,231         149,147         133,402
                                                                        ------------    ------------    ------------

CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3)                                   -               -          18,347
                                                                        ------------    ------------    ------------

NET INCOME                                                                  146,231         149,147         151,749
                                                                        ------------    ------------    ------------

PREFERRED DIVIDEND REQUIREMENTS                                               3,213           3,119           2,760
                                                                        ------------    ------------    ------------

INCOME APPLICABLE TO COMMON STOCK                                       $   143,018     $   146,028     $   148,989
                                                                        ============    ============    ============

See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                     INDIANAPOLIS POWER & LIGHT COMPANY

                                               Balance Sheets
                                         December 31, 1999 and 1998
--------------------------------------------------------------------------------------------------------------

ASSETS                                                                      1999                    1998
--------------------------------------------------------------------------------------------------------------

                                                                                (In Thousands)

UTILITY PLANT:
<S>                                                                  <C>                      <C>
  Utility plant in service (Note 2)                                  $     2,922,338          $     2,859,899
  Less accumulated depreciation                                            1,299,122                1,202,356
                                                                     ----------------         ----------------
      Utility plant in service - net                                       1,623,216                1,657,543
  Construction work in progress                                              116,478                   80,198
  Property held for future use                                                10,718                   10,719
                                                                     ----------------         ----------------
      Utility plant - net                                                  1,750,412                1,748,460
                                                                     ----------------         ----------------

OTHER PROPERTY:
  At cost, less accumulated depreciation                                       5,753                    5,790
                                                                     ----------------         ----------------

CURRENT ASSETS:
  Cash and cash equivalents                                                   16,234                    4,250
  Accounts receivable and unbilled revenue (less allowance for
doubtful
    accounts - 1999, $1,091,000 and 1998, $996,000) (Note 3)                  49,599                   36,692
  Fuel - at average cost                                                      50,985                   38,968
  Materials and supplies - at average cost                                    48,106                   48,163
  Tax refund receivable                                                        3,549                    7,643
  Prepayments and other current assets                                         8,120                    3,634
                                                                     ----------------         ----------------
      Total current assets                                                   176,593                  139,350
                                                                     ----------------         ----------------

DEFERRED DEBITS:
  Regulatory assets (Note 5)                                                 107,948                  116,801
  Miscellaneous                                                                8,044                   12,665
                                                                     ----------------         ----------------
      Total deferred debits                                                  115,992                  129,466
                                                                     ----------------         ----------------


      TOTAL                                                          $     2,048,750          $     2,023,066
                                                                     ================         ================


See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------

CAPITALIZATION AND LIABILITIES                                              1999                     1998
--------------------------------------------------------------------------------------------------------------
                                                                                   (In Thousands)

CAPITALIZATION (See Notes 6 and 7):
<S>                                                                   <C>                      <C>
  Common shareholder's equity
    Common stock, no par, authorized - 20,000,000 shares, issued and outstanding
      - 17,206,630 shares in 1999,
      17,206,630 shares in 1998                                       $       324,537          $      324,537
    Premium and net gain on preferred stock                                     2,642                   2,642
    Retained earnings                                                         453,331                 440,747
                                                                      ----------------         ---------------
      Total common shareholder's equity                                       780,510                 767,926
  Cumulative preferred stock                                                   59,135                  59,135
  Long-term debt (Note 2)                                                     627,951                 627,893
                                                                      ----------------         ---------------
        Total capitalization                                                1,467,596               1,454,954
                                                                      ----------------         ---------------

CURRENT LIABILITIES:
  Notes payable - banks and commercial paper (Note 8)                          49,000                  19,200
  Accounts payable and accrued expenses                                        53,437                  64,461
  Dividends payable                                                            13,668                  13,158
  Taxes accrued                                                                22,078                  18,283
  Interest accrued                                                             12,898                  13,326
  Other current liabilities                                                    13,356                  13,731
                                                                      ----------------         ---------------
      Total current liabilities                                               164,437                 142,159
                                                                      ----------------         ---------------


DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
  Deferred income taxes - net (Note 9)                                        339,986                 328,417
  Unamortized investment tax credit                                            39,226                  41,993
  Accrued postretirement benefits (Note 11)                                     4,338                  10,768
  Accrued pension benefits (Note 11)                                           29,018                  39,953
  Miscellaneous                                                                 4,149                   4,822
                                                                      ----------------         ---------------
      Total deferred credits and other long-term liabilities                  416,717                 425,953
                                                                      ----------------         ---------------

COMMITMENTS AND CONTINGENCIES (Note 12)

      TOTAL                                                           $     2,048,750          $    2,023,066
                                                                      ================         ===============

See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                          INDIANAPOLIS POWER & LIGHT COMPANY

                                               Statements of Cash Flows
                                 For the Years Ended December 31, 1999, 1998 and 1997
-----------------------------------------------------------------------------------------------------------------------

                                                                             1999             1998             1997
-----------------------------------------------------------------------------------------------------------------------
                                                                                         (In Thousands)
CASH FLOWS FROM OPERATIONS:
<S>                                                                      <C>             <C>              <C>
  Net income                                                             $   146,231     $    149,147     $    151,749
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                                            106,311          100,829           98,908
    Amortization of regulatory assets                                         14,470           14,246           16,210
    Deferred income taxes and investment tax credit adjustments - net          6,227           (2,483)          12,669
    Allowance for funds used during construction                              (2,201)          (2,300)          (4,407)
    Cumulative effect of accounting change - before taxes (Note 3)                 -                -          (29,915)
    Change in certain assets and liabilities:
     Accounts receivable - excluding cumulative effect
         of accounting change                                                (12,907)           6,361           (5,246)
      Fuel, materials and supplies                                           (11,960)          (4,483)            (500)
      Accounts payable                                                       (11,024)             491            7,433
      Taxes accrued                                                            3,795             (391)            (947)
      Accrued pension benefits                                               (10,935)             132            2,538
      Other - net                                                             (3,148)          (9,338)          (6,200)
                                                                         ------------    -------------    -------------
Net cash provided by operating activities                                    224,859          252,211          242,292
                                                                         ------------    -------------    -------------

CASH FLOWS FROM INVESTING:
  Construction expenditures                                                 (103,452)         (79,458)         (73,130)
  Other                                                                       (5,832)          (1,102)          (2,333)
                                                                         ------------    -------------    -------------
Net cash used in investing activities                                       (109,284)         (80,560)         (75,463)
                                                                         ------------    -------------    -------------

CASH FLOWS FROM FINANCING:
  Issuance of long-term debt                                                  23,500                -                -
  Issuance of preferred stock (Note 6)                                             -           50,000                -
  Retirement of long-term debt                                               (23,500)               -          (11,250)
  Preferred stock redemptions (Note 6)                                             -                -          (41,814)
  Short-term debt - net                                                       29,800           (4,500)         (10,300)
  Dividends paid                                                            (133,137)        (217,362)        (107,384)
  Other                                                                         (254)            (489)              29
                                                                         ------------    -------------    -------------
Net cash used in financing activities                                       (103,591)        (172,351)        (170,719)
                                                                         ------------    -------------    -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          11,984             (700)          (3,890)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                 4,250            4,950            8,840
                                                                         ------------    -------------    -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $    16,234     $      4,250     $      4,950
                                                                         ============    =============    =============

-----------------------------------------------------------------------------------------------------------------------
Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
    Interest (net of amount capitalized)                                 $    39,215     $     38,644     $     39,837
                                                                         ============    =============    =============
    Income taxes                                                         $    79,004     $     90,467     $     75,621
                                                                         ============    =============    =============

See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                              INDIANAPOLIS POWER & LIGHT COMPANY

                                               Statements of Retained Earnings
                                     For the Years Ended December 31, 1999, 1998 and 1997
-------------------------------------------------------------------------------------------------------------------------------

                                                                                 1999               1998               1997
-------------------------------------------------------------------------------------------------------------------------------
                                                                                               (In Thousands)


<S>                                                                        <C>                 <C>                <C>
RETAINED EARNINGS AT BEGINNING OF YEAR                                     $     440,747       $    508,626       $    456,349
NET INCOME                                                                       146,231            149,147            151,749
                                                                              -----------        -----------        -----------
    Total                                                                        586,978            657,773            608,098

DEDUCT:
  Cash dividends declared:
    Cumulative preferred stock - at prescribed
      rate of each series (See Note 6)                                             3,213              3,119              2,760
    Common stock                                                                 130,434            213,417             96,712
    Capital stock expense                                                           -                   490               -
                                                                           --------------      -------------      -------------
    Total                                                                        133,647            217,026             99,472
                                                                           --------------      -------------      -------------

RETAINED EARNINGS AT END OF YEAR                                           $     453,331       $    440,747       $    508,626
                                                                           ==============      =============      =============

See notes to financial statements.
</TABLE>
<PAGE>

                       INDIANAPOLIS POWER & LIGHT COMPANY
                       ==================================
                          Notes to Financial Statements
              For the Years Ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       All the outstanding  common stock of  Indianapolis  Power & Light Company
(IPL) is owned by IPALCO  Enterprises,  Inc. At December 31, 1999 and 1998,  IPL
had a receivable, which is due on demand, for advances made to IPALCO.

     Nature of Operations:  IPL is engaged principally in providing electric and
steam service to the Indianapolis metropolitan area.

       Concentrations  of Risk:  Substantially all of IPL's business activity is
with customers located within the Indianapolis area. In addition,  approximately
66% of IPL's employees are covered by collective bargaining agreements.

       Regulation:  The  retail  utility  operations  of IPL are  subject to the
jurisdiction  of  the  Indiana  Utility  Regulatory   Commission  (IURC).  IPL's
wholesale  power  transactions  are subject to the  jurisdiction  of the Federal
Energy  Regulatory  Commission.  These agencies  regulate IPL's utility business
operations,  tariffs,  accounting,  depreciation allowances,  services, security
issues  and the  sale and  acquisition  of  utility  properties.  The  financial
statements  of IPL  are  based  on  generally  accepted  accounting  principles,
including the provisions of Statement of Financial  Accounting Standards No. 71,
"Accounting  for the  Effects  of  Certain  Types of  Regulation,"  which  gives
recognition to the ratemaking and accounting practices of these agencies.

       Revenues:  Effective  January 1, 1997,  IPL adopted the unbilled  revenue
method of  accounting  for electric and steam  delivered  during the period (see
Note 3).  Revenues are accrued for services  provided but unbilled at the end of
each month.

       A fuel adjustment  charge  provision,  which is established  after public
hearing,  is  applicable  to most of the rate  schedules  of IPL and permits the
billing or crediting of estimated fuel costs above or below the levels  included
in such rate  schedules.  Actual fuel costs in excess of or under estimated fuel
costs billed are deferred or accrued, respectively.

       On August 18, 1999, the IURC issued an order that allows for the recovery
of purchased power costs based on a benchmark. This benchmark will be determined
by the calculation of a utility's  highest  on-system fuel cost. If the cost per
Mwh of power  purchases is not greater than the  benchmark,  then the  purchased
power costs should be  considered  net energy costs that are presumed fuel costs
included in purchased  power.  If the average cost per Mwh of power purchases is
greater  than the  benchmark,  then  the  costs  are  recoverable  only  through
demonstration of the  reasonableness of those purchases to the IURC. The Indiana
Office of Utility  Consumer  Counselor  has appealed that order and the eventual
outcome of this matter is unknown at this time.

       Authorized  Annual  Operating  Income:   Indiana  law  requires  electric
utilities  under the  jurisdiction  of the IURC to meet  operating  expense  and
income  requirements  as a condition  for approval of requested  changes in fuel
adjustment charges. Additionally,  customer refunds may result if the utilities'
rolling 12-month  operating income,  determined at quarterly  measurement dates,
exceeds the utilities'  authorized  annual operating income and cannot be offset
by  applicable   cumulative  net  operating  income  deficiencies.   In  such  a
circumstance,  the required customer refund for the quarterly measurement period
is calculated to be one-fourth of the excess annual  operating income grossed up
for federal and state taxes as required under I. C.
8-1-2-42.5.

       Effective July 1, 1996, IPL's authorized annual  jurisdictional  electric
net operating income, for purposes of quarterly  operating income tests, is $163
million,  as established in an IURC order dated August 24, 1995. This level will
be maintained until changed by an IURC order.  During 1999, the Commission found
that IPL's rolling annual  jurisdictional  retail electric  operating income was
less  than the  authorized  annual  operating  income  at each of the  quarterly
measurement dates (January, April, July and October). At October 31, 1999, IPL's
most recent  quarterly  measurement  date,  IPL had a cumulative  net  operating
deficiency of $128.8 million,  of which $10.6 million expires at varying amounts
during  the period  ending  September  1,  2000.  The  operating  deficiency  is
calculated  by summing the 20 most recent  quarterly  measurement  period annual
results  or from the date of the last rate  order,  whichever  is  longer.  As a
consequence,  IPL  could,  for a period of time,  earn  above  $163  million  of
electric  jurisdictional  retail net operating  income without being required to
make a customer refund.

       Through  the date of IPL's  next  general  electric  rate  order,  IPL is
required  to file  upward and  downward  adjustments  in fuel cost  credits  and
charges on a quarterly basis, based on changes in the cost of fuel, irrespective
of its level of earnings.

       Pursuant  to an order of the  IURC,  IPL's  authorized  annual  steam net
operating  income is $6.2  million,  plus any  cumulative  annual  underearnings
occurring during the five-year period  subsequent to the  implementation  of the
new rate  tariffs.  During 1999,  IPL's annual  jurisdictional  steam  operating
income was less than the authorized  annual  operating income at the January 31,
1999 measurement date.

       Allowance  For Funds Used During  Construction:  In  accordance  with the
prescribed uniform system of accounts,  IPL capitalizes an allowance for the net
cost of funds (interest on borrowed funds and a reasonable rate on equity funds)
used  for  construction  purposes  during  the  period  of  construction  with a
corresponding  credit to income. IPL capitalized  amounts using pretax composite
rates of 9.4%, 9.7% and 9.1% during 1999, 1998 and 1997, respectively.

       Utility Plant and Depreciation:  Utility plant is stated at original cost
as defined for regulatory  purposes.  The cost of additions to utility plant and
replacements of retirement units of property, as distinct from renewals of minor
items that are charged to maintenance,  are charged to plant accounts.  Units of
property  replaced or abandoned  in the ordinary  course of business are retired
from the plant accounts at cost; such amounts plus removal costs,  less salvage,
are  charged  to  accumulated  depreciation.  Depreciation  is  computed  by the
straight-line method based on functional rates approved by the IURC and averaged
3.5% during 1999, 1998 and 1997.

     Sale of  Accounts  Receivable:  IPL has  sold,  on a  revolving  basis,  an
undivided percentage interest in $50 million of its accounts receivable.

       Regulatory  Assets:  Regulatory assets represent deferred costs that have
been  included as  allowable  costs for  ratemaking  purposes.  IPL has recorded
regulatory assets relating to certain costs as authorized by the IURC.  Specific
regulatory  assets  are  disclosed  in Note  5. As of  December  31,  1999,  all
nontax-related regulatory assets have been included as allowable costs in orders
of the IURC (see Note 10). IPL is amortizing such  regulatory  assets to expense
over periods authorized by these orders. Tax-related regulatory assets represent
the net  income  tax costs to be  considered  in future  regulatory  proceedings
generally as the tax related amounts are paid .

       In accordance  with  regulatory  treatment,  IPL deferred as a regulatory
asset  certain post  in-service  date  carrying  charges and certain other costs
related  to its  investment  in  Petersburg  Unit 4. As  authorized  in the 1995
Electric Rate Settlement,  IPL, effective  September 1, 1995, is amortizing this
deferral to expense over a life that generally  approximates  the useful life of
the related facility.  Also in accordance with regulatory treatment,  IPL defers
as  regulatory  assets  non-sinking  fund debt and  preferred  stock  redemption
premiums and expenses,  and  amortizes  such costs over the life of the original
debt, or, in the case of preferred stock redemption premiums, over 20 years.

       Derivatives:  IPL has only limited involvement with derivative  financial
instruments  and does not use them for trading  purposes.  IPL  entered  into an
interest  rate swap  agreement as a means of managing the interest rate exposure
on one of its debt  facilities.  This  interest rate swap is accounted for under
the accrual method.  Under this method,  the differential to be paid or received
on the interest rate swap agreement is recognized over the life of the agreement
in interest expense.  Changes in market value of the interest swap accounted for
under  the  accrual  method  are not  reflected  in the  accompanying  financial
statements.

       Income Taxes:  Deferred taxes are provided for all significant  temporary
differences  between  book and taxable  income.  The effects of income taxes are
measured based on enacted laws and rates.  Such  differences  include the use of
accelerated depreciation methods for tax purposes, the use of different book and
tax  depreciable  lives,  rates and  in-service  dates and the  accelerated  tax
amortization  of  pollution   control   facilities.   Deferred  tax  assets  and
liabilities are recognized for the expected future tax  consequences of existing
differences  between the financial  reporting and tax reporting  basis of assets
and  liabilities.  IPL has  recorded as  regulatory  assets and net deferred tax
liabilities,  income  taxes  payable  and  includable  in  allowable  costs  for
ratemaking purposes in future years. Investment tax credits that reduced federal
income taxes in the years they arose have been deferred and are being  amortized
to income over the useful lives of the properties in accordance  with regulatory
treatment.

       IPL participates in a tax sharing agreement with the consolidated  IPALCO
group  which  allocates  taxes  as if  each  company  had  filed a  return  on a
stand-alone basis.

       Cash and Cash  Equivalents:  IPL considers all highly liquid  investments
purchased with original maturities of 90 days or less to be cash equivalents.

     Employee Benefit Plans: Substantially all employees of IPL are covered by a
defined benefit pension plan, a defined  contribution  plan and a group benefits
plan.

       The defined benefit pension plan is noncontributory and is funded through
two trusts.  Additionally,  a select  group of  management  employees of IPL are
covered under a funded  supplemental  retirement plan.  Collectively,  these two
plans are  referred  to as the  Plans.  Benefits  are  based on each  individual
employee's  years of  service  and  compensation.  IPL's  funding  policy  is to
contribute  annually not less than the minimum  required by applicable  law, nor
more than the  maximum  amount  that can be  deducted  for  federal  income  tax
purposes.

       The  defined  contribution  plan is  sponsored  by IPL as the  Employees'
Thrift Plan of Indianapolis Power & Light Company (Thrift Plan). Employees elect
to make  contributions  to the Thrift Plan based on a percentage of their annual
base compensation. Each employee's contribution is matched in amounts up to, but
not  exceeding,   4%  of  the  employee's   annual  base   compensation.   IPL's
contributions  to the Thrift Plan, net of amounts  allocated to related  parties
were  $3.5  million,  $3.4  million  and $3.3  million  in 1999,  1998 and 1997,
respectively.

       The  group  benefits  plan  is  sponsored  by IPL  and  provides  certain
health-care  and life insurance  benefits to active  employees and employees who
retire from active  service on or after  attaining  age 55 and have  rendered at
least 10 years of service.  The postretirement  benefit obligations of this plan
are funded through a Voluntary  Employee  Beneficiary  Association (VEBA) Trust.
IPL's policy is to fund the annual actuarially determined postretirement benefit
cost.

       New Accounting Pronouncement: Statement of Financial Accounting Standards
No.  133  (SFAS  133),   "Accounting  for  Derivative  Instruments  and  Hedging
Activities,"  was issued in June 1998.  SFAS 137 delayed the  effective  date of
this standard to all fiscal quarters of all years beginning after June 15, 2000.
This statement  establishes  accounting  and reporting  standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
condition and measure those instruments at fair value. If certain conditions are
met, a derivative may be  specifically  designated as a fair value hedge, a cash
flow  hedge,  or a hedge of a foreign  currency  exposure.  The  accounting  for
changes in the fair value of a derivative (that is, gains and losses) depends on
the intended use of the derivative and the resulting designation. Management has
not yet quantified the effect of the new standard on the financial statements.

       Use of Management  Estimates:  The preparation of financial statements in
conformity  with  generally  accepted   accounting   principles   requires  that
management  make  certain  estimates  and  assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities  at the date of the financial  statements.  The reported  amounts of
revenues and expenses  during the  reporting  period may also be affected by the
estimates and  assumptions  management is required to make.  Actual  results may
differ from those estimates.  During 1999, IPL changed its estimate for unbilled
revenue which resulted in a $8.0 million increase to unbilled revenue.

     Reclassifications:  Certain amounts from prior years' financial  statements
have been reclassified to conform to the current year presentation.

2.  UTILITY PLANT IN SERVICE

     The original cost of utility plant in service at December 31, segregated by
functional classifications, follows:


                                                  1999               1998
--------------------------------------------------------------------------------
                                                       (In Thousands)


Production.................................     $1,735,026        $1,716,786
Transmission...............................        239,976           238,453
Distribution...............................        802,543           761,296
General  ..................................        144,793           143,364
                                               -----------      ------------
         Total utility plant in service....     $2,922,338        $2,859,899
                                                ==========        ==========

       Substantially  all of  IPL's  property  is  subject  to the  lien  of the
indentures securing IPL's First Mortgage Bonds.

       In 1997, IPL retired and sold its C.C. Perry W plant site, including land
and  improvements,  to the state of Indiana White River State Park Commission at
an approximate  pretax net gain of $5.7 million included under the caption OTHER
INCOME AND (DEDUCTIONS), "Other - net."

3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE

       In December  1997, IPL changed its method of accounting  (retroactive  to
January 1,  1997) to record  revenues  of all  electricity  and steam  delivered
during the period.  Prior to 1997, IPL  recognized  revenues on a cycle basis as
meters were read. The new accounting method more accurately  reports revenues in
the period in which  electricity and steam is used by customers.  The cumulative
effect of the change in  accounting at January 1, 1997 was $18.3 million (net of
income taxes of $11.2  million and other taxes of $.4  million).  The change had
the effect of decreasing 1997 income before  cumulative effect of the accounting
change by $1.9 million (net of taxes).

4.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

       The estimated fair value of financial  instruments has been determined by
IPL using available market information and appropriate valuation  methodologies.
However,  considerable  judgment  is  required  in  interpreting  market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not  necessarily  indicative  of the  amounts  that IPL could  realize  in a
current  market  exchange.  The  use  of  different  market  assumptions  and/or
estimation methodologies may have an effect on the estimated fair value amounts.

       Cash  and  Cash  Equivalents  and  Notes  Payable:  The  carrying  amount
approximates fair value due to the short maturity of these instruments.

       Long-Term   Debt,   Including   Current   Maturities   and  Sinking  Fund
Requirements: Interest rates that are currently available to IPL for issuance of
debt with  similar  terms and  remaining  maturities  are used to estimate  fair
value.  The  variable  rate debt has been  included  at the face amount for both
carrying  amount  and fair  value.  The fair  value of the  interest  rate  swap
agreement has been estimated at $.4 million and $(5.7) million, which represents
the amount  that IPL would  have to pay or  receive to enter into an  equivalent
agreement  at  December  31,  1999,   and  1998,   respectively,   with  a  swap
counterparty.  The fair value of the debt outstanding has been determined on the
basis of the  specific  securities  issued  and  outstanding.  Accordingly,  the
purpose of this  disclosure is not to approximate  the value on the basis of how
the debt might be  refinanced.  At December  31,  1999,  and 1998,  the carrying
amount of IPL's long-term debt,  including  current  maturities and sinking fund
requirements, and the approximate fair value are as follows:

                                           1999               1998
     -------------------------------------------------------------
                                                (In Thousands)

       Carrying amount                  $627,951          $627,893
       Approximate fair value            615,071           667,035

5.  REGULATORY ASSETS

       The amounts of regulatory assets at December 31 are as follows:

                                                         1999            1998
--------------------------------------------------------------------------------
                                                            (In Thousands)

Related to deferred taxes (Note 1)                    $  49,398       $  46,823
Postretirement benefit costs in excess of
   cash payments and amounts capitalized (Note 11)        4,288          10,720
Unamortized reacquisition premium on debt (Note 1)       21,687          22,301
Unamortized Petersburg Unit 4 carrying charges
     and certain other costs (Note 1)                    28,119          29,174
Demand side management costs (Note 10)                    4,456           7,783
                                                      ---------       ---------
Total regulatory assets                               $ 107,948       $ 116,801
                                                      =========       =========


6.  CAPITAL STOCK

     Common Stock:  There were no changes in IPL common stock during 1999,  1998
and 1997.

       Restrictions on the payment of cash dividends or other  distributions  on
common stock and on the purchase or  redemption  of such shares are contained in
the indentures  securing IPL's First Mortgage  Bonds.  In addition,  pursuant to
IPL's  Articles of  Incorporation,  no  dividends  may be paid or accrued and no
other  distribution  may be made on the common  stock  unless  dividends  on all
outstanding  shares of its  preferred  stock have been paid or declared  and set
apart for payment.  All of the retained earnings at December 31, 1999, were free
of such restrictions.

       Cumulative  Preferred Stock of Subsidiary:  Preferred stock  shareholders
are entitled to two votes per share for IPL matters,  and if four full quarterly
dividends are in default on all shares of the preferred stock then  outstanding,
they are entitled to elect the smallest  number of IPL Directors to constitute a
majority.  Preferred stock is redeemable  solely at the option of IPL and can be
redeemed in whole or in part at any time at specific call prices.

       On January  13,  1998,  IPL issued the 5.65%  Preferred  Series  which is
redeemable at par value, subject to certain  restrictions,  in whole or in part,
at any time on or after January 1, 2008, at the option of IPL.

At December 31, preferred stock consisted of the following:

                                      December 31, 1999
                                       Shares      Call          December 31
                                     Outstanding   Price      1999        1998
                                     -----------   -----     ------      ------
                                                               (In Thousands)
Cumulative $100 Par Value,
     authorized 2,000,000 shares

     4% Series.....................   47,611    $118.00      $4,761      $4,761
     4.2% Series...................   19,331     103.00       1,933       1,933
     4.6% Series...................    2,481     103.00         248         248
     4.8% Series...................   21,930     101.00       2,193       2,193
     5.65% Series..................  500,000          -      50,000      50,000
                                     -------                -------     -------
Total cumulative preferred stock...  591,353                $59,135     $59,135
                                     =======                =======     =======

       During 1999, 1998 and 1997,  preferred stock dividends were $3.2 million,
$3.1 million and $2.8 million, respectively.

7.  LONG-TERM DEBT

       Long-term debt consists of the following:
                                                               December 31,
                                                               ------------
                                                          1999           1998
                                                          ----           ----
           Series                  Due                       (In Thousands)
           ------                  ---
     First Mortgage Bonds:
         6.05%             February 2004.............  $ 80,000        $ 80,000
         8%                October 2006..............    58,800          58,800
         7 3/8%            August 2007...............    80,000          80,000
         6.10% *           January 2016..............    41,850          41,850
         5.40% *           August 2017...............    24,650          24,650
         7.45%             August 2019...............         -          23,500
         5.50% *           October 2023..............    30,000          30,000
         7.05%             February 2024.............   100,000         100,000
         6 5/8% *          December 2024.............    40,000          40,000
     Unamortized discount - net......................      (849)           (907)
                                                      ---------       ---------
         Total first mortgage bonds..................   454,451         477,893

     IPL Variable Series Notes
         1991*             August 2021...............    40,000          40,000
         1994A*            December 2024.............    20,000          20,000
         1995B*            January 2023..............    40,000          40,000
         1995C*            December 2029.............    30,000          30,000
         1996*             November 2029.............    20,000          20,000
         1999              August 2030...............    23,500               -
                                                      ---------       ---------
         Total long-term debt .......................  $627,951        $627,893
                                                      =========       =========

* Notes are issued to the city of Petersburg, Indiana, by IPL to secure the loan
of proceeds from various tax-exempt instruments issued by the city.

       IPL  redeemed the $23.5  million,  7.45% Series bond in October 1999 with
the proceeds from $23.5 million variable rate note issued September 1999.

       The IPL Series 1991 note  provides for an interest  rate that varies with
the tax-exempt commercial paper rate. The IPL 1994A, 1995B, 1995C and 1996 notes
provide  for an interest  rate which  varies with the  tax-exempt  weekly  rate.
Additionally,  these notes can be converted into  long-term  fixed interest rate
instruments  by the  issuance  of an IPL  First  Mortgage  Bond.  The  notes are
classified  as  long-term  liabilities  because  IPL  maintains  a $150  million
long-term  credit facility  supporting  these  agreements,  which were unused at
December 31, 1999.  The IPL Series 1999 note provides for an interest rate which
varies based on tax-exempt  auction  rates.  IPL, at its option,  can change the
interest rate mode for these notes to be based on other short-term rates.


       The year-end interest rates for the variable rate notes are as follows:

                                           Interest Rate at
                                             December 31
                                       1999           1998
 -----------------------------------------------------------------------------

 Series 1991                          3.14%           3.48%
 Series 1994A                         3.38%           3.56%
 Series 1995B                         5.21%           5.21%
 Series 1995C                         3.41%           3.54%
 Series 1996                          3.41%           3.54%
 Series 1999                          3.74%             -

       In  conjunction  with the issuance of the 1995B note, IPL entered into an
interest  rate swap  agreement.  Pursuant  to the swap  agreement,  IPL will pay
interest  at a fixed  rate of 5.21% to a swap  counterparty  and will  receive a
variable  rate of interest in return,  which is identical  to the variable  rate
payment made on the 1995B note. The result is to  effectively  establish a fixed
rate of interest on the 1995B note of 5.21%. The interest rate swap agreement is
accounted for on a settlement  basis. IPL is exposed to credit loss in the event
of  nonperformance  by the counterparty for the net interest  differential  when
floating rates exceed the fixed maximum rate.  However,  IPL does not anticipate
nonperformance by the counterparty.

8.  LINES OF CREDIT

       IPL has  committed  lines of credit  with  banks of $55  million  used to
provide  loans for  interim  financing.  These  lines  require  the  payment  of
commitment fees. At December 31, 1999, $9 million was  outstanding,  $40 million
was used to support  commercial paper and $6 million was unused.  These lines of
credit,  based on  separate  agreements,  have  expiration  dates  ranging  from
February 2000 to April 2000.

     The weighted  average  interest rate on notes payable and commercial  paper
outstanding was 6.12% and 6.13% at December 31, 1999, and 1998, respectively.

9.  INCOME TAXES

       Federal and state income taxes charged to income are as follows:
<TABLE>
<CAPTION>

                                                                         1999           1998           1997
-----------------------------------------------------------------------------------------------------------
Operating Expenses:                                                                (In Thousands)
  Current income taxes:
<S>                                                                      <C>            <C>            <C>
    Federal.....................................................         $68,093        $72,094        $64,553
    State.......................................................           9,208         10,585          9,474
                                                                        --------       --------       --------
      Total current taxes.......................................          77,301         82,679         74,027
                                                                        --------       --------       --------

    Deferred federal income taxes...............................           8,117           (414)         1,444
    Deferred state income taxes.................................           1,824            715            803
                                                                       ---------      ----------     ---------
      Total deferred  income taxes..............................           9,941            301          2,247
                                                                       ---------      ----------      --------

  Net amortization of investment credit.........................          (2,767)        (2,790)        (2,939)
                                                                       ---------      ---------      ---------
      Total charge to operating expenses........................          84,475         80,190         73,335
  Net debit to other income and deductions......................             581          4,196          1,105
                                                                       ---------      ---------      ---------
                                                                          85,056         84,386         74,440
  Cumulative effect of change in accounting principle...........               -              -         11,209
                                                                       ---------      ---------      ---------
      Total federal and state income tax provisions.............         $85,056        $84,386        $85,649
                                                                       =========      =========      =========
</TABLE>

       The provision for federal  income taxes  (including  net  investment  tax
credit  adjustments)  is less than the amount computed by applying the statutory
tax  rate to  pretax  income.  The  reasons  for  the  difference,  stated  as a
percentage of pretax income, are as follows:

                                              1999         1998         1997
-----------------------------------------------------------------------------
Federal statutory tax rate................    35.0%        35.0%        35.0%
Effect of state income taxes..............    (1.7)        (1.8)        (1.7)
Amortization of investment tax credits....    (1.2)        (1.2)        (1.2)
Other - net...............................    (0.2)        (1.0)        (0.9)
                                             -----        -----        -----
  Effective tax rate......................    31.9%        31.0%        31.2%
                                              ====         ====         ====

       The  significant  items  comprising  IPL's  net  deferred  tax  liability
recognized  in the balance  sheets as of December  31,  1999,  and 1998,  are as
follows:
<TABLE>
<CAPTION>

                                                                                    1999                1998
------------------------------------------------------------------------------------------------------------
                                                                                          (In Thousands)
Deferred tax liabilities:
<S>                                                                                 <C>                <C>
     Relating to utility property..........................................         $422,907           $412,922
     Other.................................................................           16,072             15,113
                                                                                  ----------         ----------
         Total deferred tax liabilities....................................          438,979            428,035
                                                                                  ----------         ----------
Deferred tax assets:
     Relating to utility property..........................................           48,417             44,444
     Investment tax credit.................................................           23,856             25,547
     Employee Benefit Plans................................................           22,018             24,259
     Other.................................................................            3,394              5,260
                                                                                  ----------         ----------
         Total deferred tax assets.........................................           97,685             99,510
                                                                                  ----------         ----------
Net deferred tax liability.................................................          341,294            328,525
     Current deferred tax liability........................................            1,308                108
                                                                                  ----------         ----------
Deferred income taxes - net................................................         $339,986           $328,417
                                                                                  ==========         ==========
</TABLE>

10.  RATE MATTERS

       Demand Side Management (DSM) Program:  In compliance with certain orders,
IPL is  deferring  certain  approved  DSM costs  and  carrying  charges.  In the
Settlement Agreement approved by the IURC on August 24, 1995, IPL was authorized
to amortize $5.3 million of such costs deferred  prior to February 1995,  over a
four-year period beginning  September 1, 1995. On July 30, 1997, IPL received an
IURC order  approving a  settlement  agreement  authorizing  IPL to recognize in
rates the existing  regulatory  asset  (consisting  of DSM costs  deferred after
January 31, 1995),  along with carrying charges,  and also to approve changes to
IPL's DSM programs.  On August 18, 1999, IPL received an IURC order  approving a
settlement  agreement  authorizing  IPL to extend its low income  single  family
residential DSM program through July 30, 2000.

       Elect  Plan:  During  1998,  the IURC  approved  a plan that  allows  IPL
customers  with less than 2,000  kilowatts of demand,  an  opportunity to choose
optional  service or payment plans.  This includes a green power option, a fixed
rate per unit of  consumption  option and a fixed  bill  option.  Customers  not
choosing  one of these  options  continue  to  receive  electric  service  under
existing tariffs.
<PAGE>

11.  PENSIONS AND OTHER POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>

                                                           Pension Benefits                 Other Benefits
                                                         ---------------------          ----------------------
(In Thousands)                                             1999          1998             1999          1998
--------------                                             ----          ----             ----          ----

Change in benefit obligation
<S>                                                     <C>           <C>                <C>           <C>
Benefit obligation at beginning of year                 $276,638      $254,540           $148,895      $135,982
Service cost                                               5,845         5,535              3,735         3,503
Interest cost                                             18,899        18,021              9,989         9,932
Actuarial (gain) loss                                    (11,765)       12,740            (17,263)        5,155
Amendments                                                   764        (1,408)                 -             -
Benefits paid                                            (13,774)      (12,790)            (5,831)       (5,677)
                                                        --------      --------           --------      --------
Benefit obligation at end of year                        276,607       276,638            139,525       148,895
                                                        --------      --------           --------      --------


Change in plan assets
Fair value of plan assets
   at beginning of year                                  290,770       262,126             83,008        68,006
Actual return on plan assets                              30,417        37,179             14,820         1,643
Employer contribution                                      3,324         4,254             18,225        19,036
Benefits paid                                            (13,774)      (12,789)            (5,831)       (5,677)
                                                        --------      --------           --------      --------
Fair value of plan assets at end of year                 310,737       290,770            110,222        83,008
                                                        --------      --------           --------      --------

                                                          34,130        14,132            (29,303)      (65,887)
Funded status

Unrecognized net gain                                    (70,048)      (55,065)           (54,405)      (30,187)
Unrecognized prior service cost                           15,241        15,871                  -             -
Unrecognized net transition (asset) obligation            (8,341)       (9,755)            79,370        85,306
Adjustment to recognize minimum liability                      -        (5,136)                 -             -
                                                        --------      --------           --------      --------
Accrued benefit cost                                    $(29,018)     $(39,953)          $ (4,338)     $(10,768)
                                                        ========      ========           ========      ========

Weighted-average assumptions as of
   December 31
Discount rate                                              7.50%         7.00%              7.50%         7.00%

</TABLE>


        The defined benefit pension plan had expected  returns on plan assets of
9.0%,  8.0% and 8.0% for 1999, 1998 and 1997  respectively.  The defined benefit
plan assumed  compensation  increases  to be 5.10% during 1998 and 1997.  During
1999,  the defined  benefit plan began using  salary  bands to determine  future
benefit  costs  rather than rate of  compensation  increases.  The  supplemental
retirement pension plan used an expected return on plan assets of 8.0% for 1999,
1998 and 1997. The supplemental plan assumed  compensation  increases to be 6.0%
for 1999, 1998 and 1997.

        Other  benefits used expected rates of return on plan assets of 8.0% for
1999, 1998 and 1997. For measurement purposes, a 6.6% annual rate of increase in
the per capita cost of covered  health care  benefits was assumed for 2000.  The
year in which the ultimate  health care cost trend rate of 4.5% will be achieved
is assumed to be 2003.
<TABLE>
<CAPTION>

                                                        Pension Benefits                           Other Benefits
                                                 ----------------------------------      ----------------------------------
(In Thousands)                                      1999        1998         1997          1999        1998        1997
                                                    ----        ----         ----          ----        ----        ----
Components of net periodic benefit cost
<S>                                                <C>          <C>         <C>           <C>        <C>          <C>
Service cost                                       $ 8,451      $10,617     $ 6,584       $ 3,735    $  3,503     $  3,942
Interest cost                                       18,899       18,021      16,873         9,991       9,932       11,088
Expected return on plan assets                     (25,417)     (20,426)    (18,344)       (6,482)     (5,223)      (3,734)
Amortization of transition (asset) obligation       (1,414)      (1,414)     (1,414)        6,105       6,093        6,093
Amortization of prior service cost                   1,394        1,124       1,159             -           -            -
Recognized actuarial gain                           (2,051)      (1,545)       (910)       (1,551)     (1,646)        (548)
                                                   --------     --------    --------      --------   ---------    --------
Periodic benefit cost                                 (138)       6,377       3,948        11,798      12,659       16,841
  Less: amounts to other parties                        (2)          65          60             -           -            -
                                                   --------     --------    --------      --------   ---------    --------
Net periodic benefit cost                             (136)       6,312       3,888        11,798      12,659       16,841
  Less: amounts capitalized                            (48)         339         621         1,888       1,924        2,930
                                                   --------     --------    --------      --------   ---------    --------
Amount charged to expense                           $  (88)     $ 5,973     $ 3,267       $ 9,910     $10,735      $13,911
                                                   ========     ========    ========      ========   =========    ========
</TABLE>

       Assumed  health  care cost trend rates have a  significant  effect on the
amounts  reported for the health care plans.  A one  percentage-point  change in
assumed health care cost trend rates would have the following effects:

                                      One Percentage-  One Percentage-
(In Thousands)                         Point Increase   Point Decrease
                                       --------------   --------------
Effect on total of service and
  interest cost components                $  1,613      $ (1,613)
Effect on postretirement
  benefit obligation                        15,406       (15,406)

      Also, during 1999, 1998 and 1997, IPL expensed  postretirement  regulatory
asset  amortization  of $6.4 million each year. The final period of amortization
is August 2000.

12.  COMMITMENTS AND CONTINGENCIES

       In 2000,  IPL  anticipates  the cost of its  construction  program  to be
approximately $107 million.

       IPL is involved in  litigation  arising in the normal course of business.
While the  results  of such  litigation  cannot  be  predicted  with  certainty,
management,  based upon advice of counsel,  believes that the final outcome will
not have a material adverse effect on the financial statements.

       With respect to environmental  issues,  IPL has ongoing  discussions with
various  regulatory  authorities  and  continues  to  believe  that  IPL  is  in
compliance with its various permits.
13.  GAIN ON TERMINATION OF AGREEMENT

       During  September  1998,  a pretax gain of $12.5  million  ($7.8  million
after-tax)  resulted from the  liquidation  and  termination  of an agreement to
purchase up to 150 megawatts of power during the summer months  through the year
2000.

14.  SEGMENT INFORMATION

       Operating  segments are  components of an enterprise  for which  separate
financial  information  is  available  and is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.  IPL's reportable  business  segments are electric and "all other."
Steam operations of IPL are in the "all other" category. The accounting policies
of the  identified  segments are  consistent  with those policies and procedures
described  in the  summary  of  significant  accounting  policies  (see Note 1).
Intersegment sales are generally based on prices that reflect the current market
conditions.  The  following  tables  provide  information  about IPL's  business
segments:
<TABLE>
<CAPTION>

                                 1999                             1998                            1997
                                 ----                             ----                            ----
                     Electric   All Other   Total    Electric   All Other  Total     Electric   All Other   Total
                     --------   ---------   -----    --------   ---------  -----     --------   ---------   -----
                                                              (In Millions)

<S>                  <C>      <C>       <C>           <C>      <C>        <C>           <C>      <C>      <C>
Operating
   Revenues          $  800   $  35     $  835        $  786   $   35     $  821        $  738   $  38    $  776
Depreciation and
   Amortization         104       3        107           100        3        103           100       3       103
Pre-tax Operating
   Income               263       5        268           255        5        260           233       8       241
Income Taxes             83       1         84            79        1         80            71       2        73
Property - net of
   Depreciation       1,674      76      1,750         1,671       77      1,748         1,693      73     1,766
Capital
   Expenditures         103       2        105            74        7         81            71       2        73
</TABLE>

15.  QUARTERLY RESULTS (UNAUDITED)

     Operating  results for the years ended  December  31,  1999,  and 1998,  by
quarter, are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                           1999
                                                ----------------------------------------------------------------
                                                March 31            June 30      September 30        December 31
                                                --------            -------      ------------        -----------

<S>                                               <C>              <C>               <C>              <C>
Operating revenues.........................       $200,831         $203,010          $228,515         $202,296
Operating income...........................         43,251           49,434            48,414           42,402
Net income.................................         33,820           39,630            38,869           33,913

                                                                           1998
                                                ----------------------------------------------------------------
                                                March 31            June 30      September 30        December 31
                                                --------            -------      ------------        -----------

Operating revenues.........................       $190,321         $206,706          $222,028         $202,201
Operating income...........................         40,142           49,198            51,665           38,506
Net income.................................         30,205           39,815            50,147           28,980
</TABLE>

     The quarterly  figures reflect  seasonal and  weather-related  fluctuations
which are normal to IPL's operations.


Item 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              ---------------------------------------------------------------
              FINANCIAL DISCLOSURE
              --------------------

              None.

                                    PART III
                                    --------



Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
              --------------------------------------------------

                  Information  relating to the directors of the registrant,  set
                  forth in the  Information  Statement of  Indianapolis  Power &
                  Light   Company   dated  March  20,  2000  (the   registrant's
                  Information Statement), under "Directors and Nominees-Election
                  of 15  Directors"  at  pages  2-4 is  incorporated  herein  by
                  reference.  Information relating to the registrant's executive
                  officers  is set  forth at page I-7 of this  Form  10-K  under
                  "Executive Officers of the Registrant at February 29, 2000."

Item 11.      EXECUTIVE COMPENSATION
              ----------------------

                  Information relating to executive  compensation,  set forth in
                  the registrant's  Information Statement under "Compensation of
                  Executive Officers" at page 10, "Compensation of Directors" at
                  page  6,  "Compensation   Committee   Interlocks  and  Insider
                  Participation"  at page 5,  "Pensions  Plans" at page 15,  and
                  "Employment Contracts and Termination of employment and Change
                  in  Control  Arrangements"  at pages  16-17,  is  incorporated
                  herein by reference.

Item 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              --------------------------------------------------------------

                  Information  relating to ownership of the registrant's  common
                  stock by persons known by the  registrant to be the beneficial
                  owners  of more  than 5% of the  outstanding  shares of common
                  stock  and  by  management,  set  forth  in  the  registrant's
                  Information  Statement under "Voting Securities and Beneficial
                  Owners" at page 2 is incorporated herein by reference.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
              ----------------------------------------------

                  Information  relating  to certain  relationships  and  related
                  transactions,   set  forth  in  the  registrant's  Information
                  Statement under "Certain Business Relationships" at page 6, is
                  incorporated herein by reference.

<PAGE>


                                     PART IV
                                     -------

Item 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
--------      ---------------------------------------------------------------

                   (a)   The  Financial  Statements  under  this  Item 14 (a) 1
                         filed in this  Form  10-K are  those of Indianapolis
                         Power & Light Company.

                         1.  Financial Statements
                             --------------------

                                Included in Part II of this report:

                                   Independent Auditors' Report

                                   Statements of Income for the Years Ended
                                     December 31, 1999, 1998 and 1997

                                   Balance Sheets, December 31, 1999 and 1998

                                   Statements of Cash Flows for the Years
                                     Ended December 31, 1999, 1998 and 1997

                                   Statements of Retained Earnings for the Years
                                     Ended December 31, 1999, 1998 and 1997

                                   Notes to Financial Statements

                         2.  Exhibits
                             --------

                                   The Exhibit  Index  beginning on page IV-5 of
                            this Annual  Report on Form 10-K lists the  exhibits
                            that are filed as part of this report.

                         3.  Financial Statement Schedules
                             -----------------------------

                                    None

                   (b)   Reports on Form 8-K

                            None

<PAGE>
<TABLE>
<CAPTION>

                                  INDIANAPOLIS POWER & LIGHT COMPANY                     EXHIBIT 12.1

                                  Ratio of Earnings to Fixed Charges




                                                               YEARS ENDED DECEMBER 31,
                                                 ------------------------------------------------------
                                                     1999                1998                 1997
                                                 --------------      --------------       -------------
                                                                (Thousands of Dollars)
Earnings, as defined:
<S>                                                   <C>                 <C>                 <C>
     Net income (1)                                   $146,231            $149,147            $133,402
     Income taxes                                       85,056              84,386              74,440
     Fixed charges, as below                            41,094              40,991              41,893
                                                 --------------      --------------       -------------

         Total earnings, as defined                   $272,381            $274,524            $249,735
                                                 ==============      ==============       =============

Fixed charges, as defined:
     Interest charges                                  $41,020             $40,810             $41,721
     Rental interest factor                                 74                 181                 172
                                                 --------------      --------------       -------------

         Total fixed charges, as defined               $41,094             $40,991             $41,893
                                                 ==============      ==============       =============

Ratio of earnings to fixed charges                        6.63                6.70                5.96
                                                 ==============      ==============       =============

(1) 1997 Net income excludes after-tax effect of cumulative effect
of accounting change

</TABLE>
<PAGE>


                                   SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              INDIANAPOLIS POWER & LIGHT COMPANY



                                                   By  /s/  John R. Hodowal
                                                   ------------------------
                                                    (John R. Hodowal, Chairman
                                                     of the Board and President)

Date:  February 29, 2000
       -----------------


       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

   Signature                                Title                   Date
   ---------                                -----                   ----

 (i) Principal Executive Officer:


  /s/ John R. Hodowal              Chairman of the Board     February 29, 2000
 ------------------------------       and Chief Executive
   (John R. Hodowal)                  Officer


 (ii) Principal Financial Officer:


  /s/ John R. Brehm                Senior Vice President-    February 29, 2000
 ------------------------------        Finance
   (John R. Brehm)


 (iii) Principal Accounting Officer:


  /s/ Stephen J. Plunkett          Controller                February 29, 2000
 ------------------------------
   (Stephen J. Plunkett)


 (iv) A majority of the Board of Directors of Indianapolis Power & Light
      Company:

 /s/ Joseph D. Barnett, Jr.                  Director         February 29, 2000
----------------------------
 (Joseph D. Barnett, Jr.)


 /s/ Daniel R. Coats                         Director         February 29, 2000
-----------------------------
 (Daniel R. Coats)


 /s/ Mitchell E. Daniels, Jr.                Director         February 29, 2000
--------------------------------------
 (Mitchell E. Daniels, Jr.)


 /s/ Rexford C. Early                        Director         February 29, 2000
--------------------------------
 (Rexford C. Early)


 /s/ Otto N. Frenzel III                     Director         February 29, 2000
-------------------------------
 (Otto N. Frenzel III)


 /s/ Max L. Gibson                           Director         February 29, 2000
--------------------------------
 (Max L. Gibson)


 /s/ John R. Hodowal                         Director         February 29, 2000
-------------------------------
 (John R. Hodowal)


 /s/ Ramon L. Humke                          Director         February 29, 2000
----------------------------
 (Ramon L. Humke)


 /s/ Andre B. Lacy                           Director         February 29, 2000
-------------------------------
 (Andre B. Lacy)


 /s/ L. Ben Lytle                            Director         February 29, 2000
----------------------------------
 (L. Ben Lytle)


 /s/ Michael S. Maurer                       Director         February 29, 2000
---------------------------------------
 (Michael S. Maurer)


 /s/ Sallie W. Rowland                       Director         February 29, 2000
-----------------------------
 (Sallie W. Rowland)


 /s/ Thomas H. Sams                          Director         February 29, 2000
----------------------------
 (Thomas H. Sams)

                                  EXHIBIT INDEX
                                  -------------

     Copies of documents  listed below which are identified with an asterisk (*)
are  incorporated  herein by reference  and made a part hereof.  The  management
contracts or compensatory plans are marked with a double asterisk (**) after the
description of the contract or plan.

  Exhibit
    No.                    Description
    ---                    -----------

3.1*    Articles of  Incorporation  of Indianapolis  Power & Light Company,
        as amended.  (Exhibit 3.1 to the Form 10-K dated 12-31-97.)

3.2*    Bylaws of  Indianapolis  Power & Light  Company,  as  amended.  (Exhibit
        3.2 to the Form 10-Q  dated  3-31-99.)

4.1*    Mortgage and Deed of Trust, dated as of May 1, 1940,  between
        Indianapolis Power & Light Company and  American  National Bank and
        Trust Company of Chicago,  Trustee, as supplemented  and modified by 30
        Supplemental Indentures.

               Exhibits D in File No. 2-4396;  B-1 in File No. 2-6210; 7-C File
        No. 2-7944;  7-D in File No.2-72944;  7-E in File No.  2-8106;  7-F in
        File No. 2-8749;  7-G in File No. 2-8749;  4-Q in File No.2-10052;  2-I
        in File No. 2-12488;  2-J in File No. 2-13903; 2-K in File No. 2-22553;
        2-L in File No.2-24581;  2-M in File No.  2-26156;  4-D in File
        No. 2-26884;  2-D in File No. 2-38332;  Exhibit A to Form 8-K for
        October 1970;  Exhibit 2-F in File No.  2-47162;  2-F in File
        No.  2-50260;  2-G in File No. 2-50260;  2-F in File No. 2-53541;
        2E in File No.  2-55154;  2E in File no. 2-60819;  2F in File
        No. 2-60819;  2-G in File No.  2-60819;  Exhibit A to Form 10-Q for the
        quarter  ended  9-30-78 File No. 1-3132;  13-4 in File No.  2-73213;
        Exhibit 4 in File No. 2-93092.  Twenty-eighth,  Twenty-ninth and
        Thirtieth Supplemental Indentures.  (Form 10-K dated for year ended
        12-31-85.)

4.2     Supplemental Indentures 32 through 42 as follows:

        Thirty-Second  Supplemental  Indenture  dated  as  of  June  1,  1989.
        Thirty-Third  Supplemental  Indenture  dated  as of  August  1,  1989.
        Thirty-Fourth  Supplemental  Indenture  dated as of  October  15,  1991.
        Thirty-Fifth  Supplemental  Indenture  dated  as of  August  1,  1992.
        Thirty-Sixth  Supplemental  Indenture  dated as of April  1,  1993.
        Thirty-Seventh  Supplemental  Indenture  dated as of October 1, 1993.
        Thirty-Eighth  Supplemental  Indenture  dated as of  October 1, 1993.
        Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
        Fortieth Supplemental Indenture dated as of February 1, 1994.
        Forty-First  Supplemental  Indenture  dated as of January 15,  1995.
        Forty-Second  Supplemental  Indenture  dated as of October 1,  1995.

10.1*   Interconnection  Agreement,  dated December 30, 1960,  between
        IPL and  Indiana &  Michigan  Electric  Company  (nka  Indiana
        Michigan Power Company) as modified  through  Modification  17
        and Addendum IV.  (Exhibit 10.6 to the Form 10-K dated 12-31-95.)

10.2    Interconnection  Agreement dated May 1, 1992, among Indianapolis  Power
        & Light Company,  PSI Energy, Inc. and CINERGY  Services,  Inc. as
        modified  through  Amendment Number 8.

10.3*   Facilities  Agreement  effective in 1968 among  Indianapolis  Power &
        Light  Company,  Public Service Company  of  Indiana, Inc. and  Indiana
        & Michigan  Electric  Company.  (Exhibit  5-G in File No.2-28756.)

10.4    Facilities  Agreement dated August 16, 1977,  between  Indianapolis
        Power & Light Company and Public Service  Company of Indiana,  Inc.,
        as modified through Amendment Number 3.

10.5*   East Central Area  Reliability  Agreement dated August 1, 1967,  between
        Indianapolis  Power & Light Company and 23 other  electric  utility
        companies as supplemented. (Exhibit 10.10 to the Form 10-K dated
        12-31-96.)

10.6*   Interconnection  Agreement  dated December 2, 1969, between Indianapolis
        Power & Light Company and Southern Indiana Gas and Electric Company as
        modified through  Modification  Number 9. (Exhibit 10.11 to the Form
        10-K dated 12-31-95).

10.7    Interconnection  Agreement  dated December 1, 1981, between Indianapolis
        Power & Light Company and Hoosier Energy Rural Electric Cooperative,
        Inc., as modified through Modification 5.

10.8*   Interconnection  Agreement,  dated October 7, 1987, between Indianapolis
        Power & Light Company and Wabash Valley Power  Association,  as modified
        through Modification 1. (Exhibit 10.13 to the Form 10-K dated 12-31-95).

10.9*   Interchange  Agreement  between  Indianapolis  Power & Light Company and
        ENRON Power Marketing,  Inc. dated August 1, 1995.  (Exhibit 10.14 to
        the Form 10-K dated 12-31-95).

10.10*  Interconnection  Agreement between  Indianapolis Power & Light
        Company and Indiana Municipal Power Agency as modified through
        Modification   1.  (Exhibit  10.15  to  the  Form  10-K  dated
        12-31-95).

10.11*  Employment  Agreement  by and among  IPALCO  Enterprises,  Inc.  and
        John R.  Hodowal  dated July 29, 1986.  (Exhibit 10.32 to the Form 10-K
        dated 12-31-94.)  **

10.12*  Directors' and Officers'  Liability  Insurance Policy No.  DO392B1A97
        effective June 1, 1998 to June 1, 1999.  (Exhibit 10.1 to the Form 10-Q
        dated 6-30-99)  **

10.13*  Unfunded  Deferred  Compensation  Plan for IPALCO  Enterprises,  Inc.
        and Indianapolis  Power & Light Company  Officers and Directors as
        amended and restated  effective  January 1, 1999.  (Exhibit  10.17
        to the Form 10-K dated 12-31-98.)  **

10.14   Indianapolis  Power & Light Company  Supplemental  Retirement  Plan and
        Trust  Agreement For a Select Group of Management Employees as modified
        through Amendment No. 2.   **

10.15*  1999 Management Incentive Program. (Exhibit 10.2 to the Form 10-Q dated
        6-30-99)  **

10.16   Form of  Termination  Benefits  Agreement  together  with  schedule
        of parties to, and dates of, the  Termination Benefits Agreements.  **

10.17   Termination Benefits Agreement between IPALCO Enterprises, Inc. and
        Ramon L. Humke.  **

12.1    Ratio of Earnings to Fixed Charges.

21.1    Subsidiaries of the Registrant.

27.1    Financial Data Schedule.